Buying your first home is an exciting yet confusing time. With all the jargon being thrown around, it’s easy to become overwhelmed and lost in a sea of acronyms. What mortgage do you get? What even is a mortgage? Can you decipher your DTI from your LVR?
To help you out during the process, we have compiled a list of the most common questions and answers for the first-time buyer. Part one will look at the questions you should be asking in the initial stages of purchasing a property and next week we will look at the topics to discuss once you have found your perfect home.
How much can I borrow?
The first thing you need to figure out, is how much you can afford. This will set you up with realistic expectations and help you avoid disappointment. Make an accurate financial plan including your income, outgoings and any financial commitments over the next couple of years such as planned holidays, new cars, weddings or additions to the family. When you know how much you can realistically budget each month along with your deposit, you will have a better understanding of what you can afford.
Can I use my KiwiSaver for my first home?
If you are member of KiwiSaver and you meet the criteria, you can withdraw all but the $1,000 kickstart when you first joined, for the purchase of your first home. As a KiwiSaver, you may also be eligible for a HomeStart Grant. For more information on KiwiSaver, head to this page.
Who shall I go to for my mortgage?
A mortgage is not a one size fits all scenario. Do not make the mistake of many first-time buyers and chose a lender on familiarity. Your bank may be great for your savings and online banking, but this does not mean that they are the best for a lifelong commitment – even if they do offer you a great short-term incentive. Shopping around for the best deal is essential, but it can be very time-consuming especially if you do not know the market. We recommend that you talk to a mortgage adviser to not only find you great rates on your mortgage, but to be on hand to answer any questions and support you in your decision.
Do I need a pre-approval?
We fully recommend that you get a pre-approval to know how much you can afford. Your own financial plan and a mortgage calculator will give you a rough estimate, but a pre-approval is an agreement in principle from the lending institutions, should you satisfy the terms and conditions. Not only will a pre-approval give you an accurate borrowing capacity, but put you in a better negotiating position during that process. It will also speed up the process once you have found your dream home.
If you are planning to buy at an auction and you are not a cash buyer, it is essential that you have your finances arranged before you bid. Your mortgage adviser can walk you through the process.
Do I need a lawyer during the buying process?
Buying your first home will probably be the largest purchase you will make in your life so it is highly recommended that seek the help of a legal professional. Your lawyer can cut through all the jargon to ensure you know what commitment you are making. A good property lawyer will act within your interests to avoid costly mistakes and make the transaction is as seamless as possible.
What type of first property should I be looking for?
The answer to this will depend entirely on your long and short-term plans. Your mortgage adviser can help you identify the best options for you, but the most important thing to remember is to identify what you can afford to buy in the early stages and only buy what you can afford. You may have to make sacrifices, but there will always be additional costs that you will need to budget for.
If you have any more questions, pick up your phone and I will be more than happy to help you out. I’ll even find you the best rates on your mortgage.