Expert advice for first-time home loan applicants

Purchasing a house is one of the biggest financial investments you could possibly make.

It is also the largest amount of debt you can incur in one, single purchase. Most people have to apply for a home loan in order to make the dream of buying a home, a reality. It is an exciting financial milestone, and deciding to invest in property is a sound financial choice.

If you are a first-time homebuyer, you might be wondering how exactly you should go about buying your own property and indeed, there are quite a few things that you should consider when applying for your first home loan.

With the number of lenders available, there are many options, but how do you pick the best-suited option for you? There are so many factors to mull over. Interest rates, establishment fees and additional services, and facilities are only some of these factors.

The number one rule is that you ensure you know all there is to know about applying for a home loan but also that you are able to distinguish the traits of a reputable home loan lender.

Are you ready to apply for a home loan?

Firstly, it is important that you know when you are ready to apply for your first home loan.

It is one of the biggest financial commitments you will ever make. It is for this reason that you should ensure you are ready to make such a commitment. The number one factor when deciding to buy a home is being able to know whether you are able to afford it.

If you are in a secure, full-time job and earn a monthly salary, you should very well know if you are able to purchase the property. If you are self-employed it might make this process more difficult, in that you might have a more unpredictable income.

Regardless, home loan lenders often offer services, which they help you determine whether you are in a financial position to afford the repayment of a property. These professional services make it easier for you to understand your own current, financial standing. Furthermore, it will give you an accurate idea of how much you would qualify for when applying for a home loan.

Before applying for a home loan, you might want to consider not only lowering your debt but also saving for a deposit towards your dream home.

Let’s look at the important factors when deciding to apply for a home loan.

What to consider when applying for a home loan

There are a number of factors to consider when you are thinking of buying your first home. These factors include:

Type of home

This is probably one of the first decisions you will need to make. What type of house would you like to buy? Consider immediate and medium-term needs. Although a mansion might not be possible for your first time buy, you need to ensure that your first home does meet your requirements.

You might also decide that you would prefer to buy land and have your home built. This allows you to build a home exactly to your requirements and preference. What you decide on, will determine the course of action that would need to be taken.

Housing needs

You need to decide what the housing needs are for you and your family – or in fact, future family. Location is something that is an important factor as ideally, you would like to be situated centrally as not to complicate you everyday life. At the very least, your home of choice should be as close as possible to shops, schools and your work, for example. The area or neighbourhood is also important as it will affect the value of your home. The idea is to be able to have your investment grow and not to buy a stagnant property in terms of growth.

Start looking

Once you have established some of the above factors, you will be able to start house hunting; you are now able to look within specific areas and more specific property types.

Start hunting for the house of your dreams

This is an exciting part of the process. It also requires you to do a lot of planning and information gathering.

Now, you are on the road to finding your dream home. Here are a few useful tips for first-time home buyers.

Keep a record of the houses you have seen

One way of doing so is using a digital camera to take photos of each one of the homes you have seen. This allows you reference when you are in the final decision-making process of buying a home.

Key points of each home

You can also write down key points of each home that you have viewed. When house-hunting, you can easily lose track of everything you have seen and the process might seem somewhat confusing thereafter. Note the size, special features and other relevant points of each home you are interested in.

 1. Location

Take note of the surrounding of the house. Are you close enough to all amenities? Or is the home rather remote? You also need to ask yourself whether you could see yourself living there. It is important to take note of all and anything that could affect you, should you buy the home.

2. Narrow down your options

With the information listed above, you can now start your elimination process. When you have shortlisted the homes you are interested in, request to view the homes a second time.

3. Make a choice

You should now have a fairly good idea of what home/homes you would like to apply for.

The next step is to find a lender that best suits your requirements.

Choose the perfect lender

You have now found the perfect home to purchase but now you need funding.

Choosing the right lender is probably the single most important decision you will have to make. We have therefore compiled these tips based on advice from home loan experts.

Types of home loans

Look for a home loan provider that offers you a number of different types of home loans. This gives you more flexibility when it comes to making an investment decision, which is a financial obligation that will be around for years to come.

Different types of home loans include basic, standard or home loan packages.

Fixed or variable interest rates

Determining whether you would like a fixed or variable interest rate is another big decision that you will need to make.

 Ensure that you speak to your property broker or home loan lender in order for you to make the best-suited choice for your financial situation. If you will not be able to afford a higher interest rate with the variable interest option, you should consider the fixed interest rate on home loans.

Consider the additional fees involved

The interest is the only amount you will be paying over and above the actual purchase price. The additional fees will largely determine the lender you choose to use. Here are some additional fees you could expect to pay:

• Application fees
• Insurance
• Legal fees
• Valuation fees
• Monthly or annual fees

Desirable features to look for choosing a home loan lender:

Extra repayments

If you are able to make extra repayments, it will benefit you greatly, financially.

Redraw facility

Some lenders allow you to redraw the additional repayments that have been made. It allows you to store your savings in your mortgage loan.

Pay interest only

There are lenders that offer a ‘pay interest only’ feature. It is usually available for up to five years. It is a feature that you might not find at most standard lenders.

Offset accounts

It allows you to save on the amount of interest you are paying as you lower the principal amount and therefore, the interest charged, is less.

Repayments holidays

The repayment holiday feature allows you to take a break from your repayments in particular situations, for example, if you have had a baby.

Using these expert tips as a first-time buyer will assist you to buy your dream home but with the added benefits of the right lender.