Buying a home is the biggest financial decision most people will make in their life. If you’re thinking about buying your first house, here are some things you should check to make sure that you’re financially ready to buy your own home.
You know the responsibilities of home ownership
Make sure that you’re well-aware of the responsibilities involved such as the ongoing expenses that need to be paid. These include your monthly mortgage repayments, rates, home insurance and utility bills. You should also know that buying a house is a huge financial commitment where you are responsible for all the repairs and maintenance your home needs.
You have a good credit score
Assess your financial situation by finding out your credit score. Do you have a history of paying off your credit card debts, car loans, student loans, or personal loans? Do you still have debts? Have you always paid your bills? Having a good credit score is important when you apply for a home loan since your lender will use this to assess how you handle credit.
You have enough money saved for the deposit
Most lenders will require a cash deposit of 15-20% of the purchase price of the property. If you can pay a deposit of 20% or more, you can avoid paying ‘Lender’s Mortgage Insurance’ (LMI).
There may also be additional fees involved that you need to pay for such as settlement costs, legal fees, stamp duty, and home loan establishment fees. The costs of these fees will vary depending on the state you’re buying in and your mortgage provider.
You got a financial plan in place
It’s important that you have your money under control for your monthly payments such as your mortgage, other loan repayments, utility bills, and everyday expenses. It’s imperative that you have a household budget in place, have some money set aside for an emergency fund, and that you can stay on track with your financial goals.
In a rising property market it can be tempting to rush into the market before prices go up further. Many people have done this and lived to regret it as the cost of home ownership has been crushing. Before you buy, pause and consider whether you can really afford all of the expenses involved for the long term.