First Time Home Buying FAQ

There comes the point in everyone's life when they contemplate buying a home of their own. First time home buying can be intimidating.

Deciding to go ahead and purchase a property is not a decision to be taken lightly. So, invariably, a first-time homebuyer will have lots of questions. 

Such questions may include:

Am I ready to buy a property?

Most of the questions relating to this point will center around finance and the ability to repay a mortgage. Questions may include:

  • Is my current job stable and likely to be so for the foreseeable future.
  • Am I a good saver and can manage to save the initial down payment.
  • Do I have other debts which will have to be serviced, i.e., credit card repayments or car loans.
  • What about ancillary or ongoing payments such as insurance, property taxes or just running a property: can I afford them?

What are some of the benefits of buying vs renting?

Buying a house or apartment means you can benefit from any uplift or increase in the property value. On the other hand, rent is just "dead money," i.e., once it's paid, it's gone, and any increase in property value will be for the owner.

There are also tax advantages for a property owner, such as tax deductions for mortgage interest and real estate taxes. Loan discount points and origination fees are also deductible in many cases.

Another benefit is that you are the "owner" of the property and will not have to move, provided you keep up with the mortgage repayments. You can amend, alter, or extend the property as you wish. There is always a risk the landlord may require you to move with rented property.

How much mortgage can I get?

This depends on the policies of the lender. However, a general rule of thumb is that you will be able to borrow about 4.0-4.5 times your gross annual income. This is before deductions for tax and any other expenses.

But there are also other limits applied. A lender will probably not grant a mortgage of more than 80-90% of the property's value. There is also a limit which means that your mortgage repayments should not exceed around 28% of your annual salary.

How much do I need for a down payment?

Most lenders require the mortgage applicant to have saved between 10-20% of the price as an initial deposit or downpayment. The exact amount varies according to the current conditions in the property market, the lender's policies, and the type and length of the loan period.

What is the difference between being pre-qualified and pre-approved for a mortgage?

Being pre-qualified means that a first-time homebuyer has been indicated by a lender of how much they "might" be able to borrow. Such amount is not guaranteed because the information provided by the mortgage applicant has not yet been verified;

Being pre-approved means that the mortgage provider has already approved the application by the first-time buyer. So, all the buyer has to do is find the right property and progress the mortgage application.

How do I get the best mortgage terms?

 To get the best terms and conditions for your first mortgage, it's worth doing some research online and looking at what different lenders offer. You can find out about the levels of interest rates. Are they fixed or variable, and the length of the loan period, etc.

For a first-time buyer, it's probably best to consult with a professional mortgage adviser to better understand some of the other key terms and conditions associated with mortgages.

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