Buying your first home – do you have the money? Mortgages and Real Estate
How much have you got?
Now, how much have you really got? No, that’s not a silly question, all too often buyers discover to their frustration that their real worth is considerably less than they thought.
Why? Well, here goes –
Do you have a credit card? If so, whatever your card limit, whether or not you have a debt on the card, even a small one – deduct the total card limit in $ from your capital. If you have more than one card, deduct each card’s limit from your capital.
Do you have a personal loan? Are you purchasing your car with finance? Do you have any other regular debt? If you do, deduct the amount of all debt from your capital.
Still looking good? Great!
Have you been in regular work for 12 months? Then get your pay slips ready. Can you show a savings record with the bank or lending institution you plan to obtain a housing loan from? Are you self-employed and, if so, can you show tax returns for the previous 3 years?
Seeing a broker for pre-approved finance is your next step so, armed with every scrap of detail about your financial position, make an appointment. Under no circumstances try to conceal debt from your broker. It’s such a waste of time and the disappointment is immense when you find the house of your dreams and have an offer accepted only to have the whole thing fall over because you forgot to mention that other credit card you have stowed away and the bank or mortgage insurer rejects your application. A good broker will poke around your finances until all is revealed, put your application together and submit it to the Lending Institution of choice.
Now, your pre-approval will have some real value and you can go shopping.
Caution: Even though the pre-approval will do wonders for your confidence it will still take 28 days for your loan to be unconditionally approved by the bank so, please, don’t feel offended when the real estate agent insists on that time frame. You and your finances may be in great shape but at this time the bank knows nothing about the property you are buying. Unless you are able to pay cash or contribute a hefty percentage of the selling price, the bank will want to value the house to make sure it is worth what you have offered. This takes time, the paperwork takes time and it is better to allow the recommended period than to insist on a week or two for approval then be in the aggravating position of having to request extension after extension. It happens all too often. It annoys the hell out of the seller and could mean the contract runs out of time.