Looking to buy your first home? Congratulations! A home might be the biggest investment you’ll ever make. It means moving into a place that you can finally call your own. But before you start scouring the market for listings, you need to know how to go about purchasing your first home. Here, we’ve summarized everything you need to look out for as a first time home buyer – whether you’re considering a BTO, private residence or a new launch condo like Meyer Mansion.
Things to Look out for – First Time Property Buyer
Know What You Can Afford
Determine how much you can comfortably spend on a home before you start scouring the market for homes. You should set a reasonable price range depending on your income, credit score, down payment, debts and where you want to live. It is tempting to fall in love with properties that are beyond your budget, but overstretching your finances is not a good idea. Keep in mind that home prices are still increasing, so you need to figure out what you can afford.
Purchasing a property that surpasses your budget might put you at a greater risk of losing the property if you find yourself in difficult financial times. You might also be unable to pay your other expenses and bills.
Therefore, focus on what you can afford each month instead of concentrating on the maximum loan amount you’re eligible for. Just because you’re eligible for a $400,000 loan doesn’t mean that you can comfortably pay off the loan. Consider your other obligations that are typically not shown on a credit report when figuring out how much you can afford.
Check Your Credit Strength
Lenders consider credit reports during pre-approval and again prior to closing. They want to ensure everything is okay with your financial situation.
Any new credit card accounts or loans on your credit report might have a negative impact on your loan approval. First-time property buyers often discover this when it’s too late.
When it comes to finances, try and maintain the status quo throughout the process. Don’t take out new loans, get new credit cards, make huge purchases on your old credit accounts or close the accounts when planning to apply for a mortgage until closing day. Pay your monthly bills in full and on time every month and reduce your balances to less than 30% of your credit limit.
Is There Any Property Valuation?
Property valuation is an estimate of what a house is worth. It shows how much you’ll be expected to pay for the home. It is very important to pay attention to the property valuation, which refers to the estimations of the property’s value. This is because it can reduce the amount of mortgage loan you can qualify for.
Once you have identified your desired property, you should visit the URA or HDB website to check for any past transaction data of the property or use an online property valuation tool.
First-time property buyers applying for a home loan should keep the following information in mind:
- Loan to Value limit is 75 percent: this means you can only receive a housing loan up to 75 percent of the value of the property.
- Loan to Value limit is 55 percent if the loan term goes beyond your age of 65 years or the loan tenure is more than 30 years.
Wiping Out Your Savings
When looking to purchase your first property, you want to plan well to ensure nothing gets in your way. However, you may be tempted to wipe out your savings so as to purchase your desired property.
The problem is that there are a lot of unexpected and hidden costs that are associated with buying a home. If you don’t have any cash set aside to meet those costs and any other unexpected expenses, you could end up in serious financial difficulties, forcing you to get into more debt or miss repayments.
When determining the right time to buy a property, it’s important to ensure you have sufficient amounts of money to put down as down payment without wiping out your savings.
You need to have an emergency fund or savings account with a minimum of three months of overheads saved up, so you can avoid experiencing financial difficulties later on.
Specific Features You Want In Your New Home
Although it’s important to be a bit flexible when determining the features you want in your new property, you are probably making the most important purchase in your life, and you want that purchase to meet your needs.
Your list of features should include all of your basic desires, including size and location. You also need to look at the small details such as a bathroom layout, spacious living areas and a kitchen equipped with modern appliances.
Look At Few Homes before Deciding On One
You have several options when buying a residential property: a conventional single-family home, a condo, a townhouse, a duplex or a multi-family property with two or more units.
Each type of property has its advantages and disadvantages, based on your goals. So, it is important to determine which type of property will enable you to achieve your goals. You should check out a number of homes before choosing one, depending on your goals and budget.
Do You Need A Real Estate Agent?
While you can decide to go it alone, it’s strongly recommended to work with a real estate agent. A reliable real estate agent will search the market for properties that meet your goals and guide you every step of the negotiation process. Look for referrals from recent property buyers. Talk to at least three agents and ask for references.
When interviewing potential real estate agents, inquire about their experience working with first-time property buyers in your desired neighborhood and how they intend to help you locate your dream home.
Conclusion
Now that you know the common mistakes to avoid and are equipped with smart property buying tips, let an experienced real estate agent help you find the right home for you and kick start your homeownership journey. For more information about how to purchase your next property, check out the Ready Home website.