It’s an exciting time. You’ve saved really hard and have a deposit ready to buy your first home. You’re ready to take the plunge. But buying a home isn’t a particularly smooth or easy experience for most people, and if it’s your first time, it can be even more complicated and overwhelming. Take a minute to remember that all homebuyers go through similar confusion and concerns; the only difference is that at least they’ve done it before.

So when you’re ready to jump into the property market, take a deep breath and spend some time doing research. The better prepared you are, the easier the whole process will become. It still might be a slightly bumpy journey, but at least it won’t be quite as bad. You’ll also reduce your risks of a total disaster.

Step 1 - Check Your Finances

I spoke to a realtor once, and he said that the number one mistake first home buyers make is that they don’t make sure their finances are in order before they start looking. In other words, they get too far ahead of themselves. They find the home of their dreams, only to discover that they can’t get a loan after all. So save yourself some heartache - make sure your deposit is sufficient, and that you DO qualify for roughly the loan you think you’re going to need. Some lenders will even pre-approve you for a loan, which simply means that they assess what size loan you can afford, and unless you’re hiding something or your financial situation changes drastically in the meantime, they will give you a loan.

Going through the process of applying for a loan will also bring to light any issues with your credit report. If you know about it now, you have time to clear up any mistakes or irregularities, long before you actually need the loan.

Once you have a budget - stick to it! Looking at houses you can’t afford will only lead to disappointment.

Step 2 - Research

Okay, research is a word, a bit like budget, that tends to send a lot of people to sleep. But it’s really important to know what you’re looking for before you start looking! There’s no point going to look at houses unless you know how many bedrooms you want, what kind of house you want, where you want to live, and so on. Sit down and brainstorm some questions you can ask, so you don’t waste time looking at a property that just isn’t going to suit you. Some questions to think about include:

How many bedrooms do we need - now and in the future?
Are there schools close by?
Will it be convenient for work, or will I need to spend too much time commuting?
Is it a safe neighbourhood?
Does the house need extensive repairs or renovations?
Is their public transportation close by?
Is it in an area where it will hold its value, or even be worth more if I sell it in a few years time?

Step 3 - The Real Estate Agent

Once you know the area you want to buy in, take some time to research the local real estate agents. A good real estate agent will be very familiar with the housing market in that area, and should be patient enough to answer any questions you have about the process of buying a house. The stronger the relationship you have with your agent, the better the experience is likely to be for you. An agent who likes you and is keen to help you find the perfect home is worth his weight in gold.

Step 4 - Making An Offer

Now you’ve found the perfect home, it’s time to take the big step and make an offer. This can be a frightening and difficult step, so take your time. It can also be stressful, because as a buyer you have a budget you want to stick to, but the seller wants to get the best possible price for the house. So often there’s a bit of negotiating to get through before your offer is accepted. Take your time, keep cool, and in the end if the seller’s price is out of your reach, be prepared to walk away. The buyers who pay too much are always the ones who fall in love with a house and get themselves into financial trouble because they let their emotions lead them into a commitment they can’t afford.

It’s also important to read through any contract before you sign it. Make sure it includes what things will or won’t be included in the purchase, such as appliances. If you want to get any inspections or reports done, make sure you give yourself the option to cancel the contract if those reports detect major issues. NEVER accept the agent’s word that something is covered or included - it MUST be in writing.

Step 5 - Home Inspection

Buying a home is a huge financial commitment, and the last thing you need is to have huge repair bills the day after you move in. So make sure you get a home inspection. Sometimes you can arrange to get this done before finalising the contract, other times it occurs after it’s finalised. Personally, I always sign contracts subject to an inspection. Check with your legal adviser if you’re not sure, but it’s worth have a clause prepared which gives you the right to cancel the contract without penalty if a major problem is found in a home inspection within 14 days. If major issues are discovered, you then have the choice of cancelling the contract or perhaps negotiating a better price.

Step 6 - Closing the Deal

The most exciting moment of all - the ownership of the property is transferred to you, the buyer. Closing the deal, or settlement, can also be a time when all of a sudden the size of the commitment you’ve just made can hit you in a big way, and lead to buyer’s remorse, or doubts about your decision. Did I pay too much? What happens if I lose my job? Maybe I should have waited a bit longer to see if something better came along… There’s hardly a homebuyer alive who hasn’t thought most of those things, and plenty more, at some time between signing the contract and moving into the house.

Just remind yourself why you chose the house, and trust that you made the right decision.

For tips about choosing the right home loan, check out Home Loan Zone Central

Tags: first home buyer, fixed mortgage loan, home loan, home mortgage, Mortgage, owning homefirst home buyer, fixed mortgage loan, home loan, home mortgage, Mortgage, owning home

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If you want to borrow money from a lender, you’ll quickly learn how important your credit score is. Lending institutions will almost certainly take a look at it, and may well approve or decline your loan based on what they find. A bad credit score can also mean you’ll only be offered loans with interest rates significantly higher than standard rates.

Basically, a credit score is a number calculated by analysing the details of your credit history. Whenever you do anything that involves credit, it’s recorded. The lender takes all of your credit history, enters it into a computer, and the computer then calculates your credit score. Various credit-ranking agencies use different software, so it’s quite possible that you’ll get a different credit score with each one. However they’ll all still fall within a similar range.

Sometimes, credit scores go by the name of FICO scores. Fair Isaac Corporation (FICO) developed the software most commonly used to determine credit scores, and that’s where the name comes from.

Your credit score is compiled from a number of different parts of your credit history, and each one contributes to a different degree. Each factor is assigned a different percentage in the calculation of your credit score. Some of these factors include amounts owed, payment history, and the types of credit you currently have. So let’s take a look at the various factors in more depth, and what percentage of your credit score they will generally represent.

Payment History

Payment history includes your history of amounts paid and when, and particularly late payments. Obviously lenders like to see no late payments, as someone with a history of late payments is going to be a much bigger risk for them. Payment history accounts for 35% of your credit score.

Amounts Owing

30% of your score is based on any loans or outstanding debt that you currently have. The lender will look to see how many accounts you owe money to, and the total balance of all your amounts owing. They’re also keen to see that you don’t have access to much more debt, in terms of lines of credit or credit cards, in case you have the opportunity to overextend yourself.

Length of History

Obviously, if you have a good credit history stretching back for a number of years, that’s going to work in your favour. Lenders will look to see how long various accounts have been open, and whether there’s been any activity in those accounts. History accounts for 15% of your credit score.

Types of Credit

10% of your FICO score is allocated to analysis of the number and types of accounts you have. Lenders tend to prefer diversity, so they’d rather see a variety of account types, not just credit card accounts.

New Credit

Another 10% of your credit score is based on recent activity in your credit history. Lenders get nervous when they see a lot of recent history, particularly if the credit that was applied for has been knocked back. This tends to send warning signals that you’re in trouble, or may have the opportunity of overextending yourself. Never apply for a loan with more than one lender at a time - a batch of 10 applications all hitting your credit report around the same time will make it almost impossible for you to get an approval.

Now that you understand the factors that make up your credit score, you might be wondering what sort of number is considered a good credit score. Mostly, credit scores fall between 350 and 850. The higher your score is, the better your credit. Lenders like to see high scores, because that suggests that you’re a low risk borrower. A lender will feel comfortable that they’re a lot more likely to get their money back from someone with a high FICO score, because these people have a good, solid history of paying their debts on time and generally demonstrating good money management skills. So a high credit score means you’re low risk, and have a much great chance of your loan application being approved.

But if your credit score isn’t that high, what can you do to improve it? It doesn’t happen overnight, that’s for sure, but the sooner you start practising good money management skills, the sooner you will see your credit score rise. Always pay bills on time, and as far as possible keep your credit card balances low. Don’t open lots of new accounts in a short space of time just before applying for credit.

It’s also worth checking the information on your credit history to make sure it’s accurate and up to date. If you find anything that’s incorrect, apply to have it altered or removed. Even a few small changes may be enough to get you over the line with your next loan application.

None of this is rocket science - obviously lenders want to limit their risk, and your credit score says a lot about you and your money management skills. Remember, it’s not just a question of how much debt you currently have - lenders are looking for longer-term history showing up to date payments and generally good financial management.

So even if you don’t have plans to apply for credit in the immediate future, make the effort to keep your credit history as good as you can, because it will pay off in the future.

Find lots of other useful credit score information at Home Loan Zone Central and Bad Credit Solutions Zone

Tags: credit score, fico score, home loan, home mortgage, loan application, Mortgage, owning homecredit score, fico score, home loan, home mortgage, loan application, Mortgage, owning home

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It happens to all of us eventually - we go to pay the rent and realise how much money we hand over at rent time. Then we start to wonder if maybe we’d be better off putting that money towards buying a house. It’s never an easy decision, mainly because it’s such a big decision - one that will have an effect on you and your lifestyle for many years ahead. So let’s take a look at both options, and check out the pros and cons of owning and renting.

Firstly, let’s look at the option and buying your own home. Most people aspire to owning their own home; it’s a dream for most of us. If we’re planning to start a family, the urge to have our own home frequently becomes a lot stronger. We want to put down roots, have a feeling of financial and emotional security, as well as linking into a community for our kids to grow up in. All of these are strong motivations to buy your own home, but there are disadvantages too.

Advantages:

- You can do what you want

- It gives you a sense of security

- Long term it’s a much better investment than renting

- You have a lot of freedom

- You may qualify for a number of tax incentives

- Often it costs the same or only a little more to buy compared to renting

- You feel like you’re putting your money to good use

- It’s a chance to decorate the house exactly the way you want to

- You can build equity, and maybe borrow against that down the track

- It helps you to establish a good credit rating for the future

Disadvantages:

- If someone has an accident on your property, it’s your problem

- Also, if a neighbour’s property is damaged, for example by a tree branch falling off your tree, it’s your problem

- If it breaks - you fix it!

- You will probably start out with a very big loan, and the lender will want to get paid, no matter what happens to you financially

- You’re tied to one location - it’s hard to move quickly if your job demands it

- Insurance - you really have to have it

- Interest rates may move, if you have a variable loan rate

- You’re probably going to have to pay property taxes

- Depending on the loan, you may need to have a lump sum saved up to get a loan

Most people start life on their own by renting, and some people like it so much they never stop. Let’s take a look at the pros and cons of renting a home.

Advantages:

- You’re free to move as soon as your lease ends

- If you’re having financial problems, you can move somewhere cheaper

- Maintenance mostly isn’t your problem

- Sometimes your utility bills may be included in the rent, which makes budgeting easier

- If you rent in a complex, you might have access to a laundry, pool and other facilities

- It’s often substantially cheaper to rent in a desirable area than it is to buy a home there

Disadvantages:

- You don’t have the opportunity to stamp your personality on the place by making changes

- Rents generally go up over time

- There are no available tax deductions

- You may feel well and truly settled, only to find yourself having to move on because the house is sold

- You risk being evicted

- You may not be allowed to have pets

- There may be limits on the number of occupants

- Your rent money isn’t growing as an asset in any way

From these lists it’s easy to see that there are numerous advantages and disadvantages to both owning your own home and renting. In the end, your decision has to take into account your own personal circumstances. Where are you at financially and emotionally, and what sort of lifestyle do you want? Not only that, you have to think about where you want to be in those areas further down the track, and decide which option is most likely to get you there. There’s no doubt owning a home is a huge investment and also a huge responsibility, and you need to be prepared for that, if you make that choice. Perhaps the freedom of being able to move regularly is more your style.

The important thing is to take your time - think hard about all the different elements involved in the decision, before making up your mind. Knowing you’ve taken the time to really consider all your options will help you to feel more comfortable about your decision, whichever decision you make.

To discover more about home loans, check out Home Loan Zone Central.

Tags: home loan, home mortgage, Mortgage, owning home, renting homehome loan, home mortgage, Mortgage, owning home, renting home

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