It’s a common misconception that home ownership is only for the wealthy. In reality, the key to buying a house on the low end of the spectrum is to first be knowledgeable about what it will take to raise the finances and then continuing to pay any loans back once you’ve moved in.
Affordability Checks
Have you saved the deposit? The first step is to save a deposit of at least 10% of the purchase price. This can be achieved over an extended period with a salary increase or by saving small amounts each month. There are also other options to finance this deposit, such as by borrowing from a credit card or even through a private money lender.
Make Sure You Can Afford The Repayments
Unless you have a great amount of cash saved, there is no point in securing a loan and having a deposit but then not being able to make the monthly mortgage payments.
Bear in mind that if your mortgage repayments exceed 40 percent of your monthly income, you might be unable to pay them when interest rates rise. Also note that this doesn’t take into account any extra payments on top of the standard mortgage costs, such as if you have an investment property or any other personal circumstances.
Get Your Finances In Order
Having a stable, predictable income is another requirement for house hunting. You will have to show that you are able to make enough money to cover all your living expenses on top of paying off home loans.
If you doubt your ability to do this, it would be wise to postpone looking for a home until your situation stabilizes and improves.
Be Aware Of The Legal Requirements
A thorough check should be done of the laws and regulations that will be in place once the property is yours. There are many different sets of rules, from where and what type of properties you can own, to the types of mortgages you can apply for.
Make sure you have the right amount of rent and deposit and the right home purchase agreement. This will require your landlord to be legally obliged to allow you to buy the property from them. If they refuse your application, it will invalidate your ability to purchase the property.
If you don’t have adequate funds, it could mean a delay until you can secure a loan or you could even being refused altogether. This is where it can be helpful to have some personal financial advisers help you to find the best way forward.
Other Considerations
A bad credit history could be to your benefit in this instance. Your credit rating drops for many reasons, but missing payments in the past is one of them. This is because many banks offer home loans to people with a lower credit rating, but they will often require that they come in higher than usual.
Once you’ve made sure that you are able to find the right house and pay for it comfortably, then it’s time to move on with your search.
