Undoubtedly one of the most important issue faced when buying real estate is the ability to finance the purchase. With over 90% of real estate contracts now being subject to the buyer securing satisfactory finance to complete the sale, the property affordability remains the greatest market factor influencing the real estate industry.
So as to provide buyers with a more definitive price category and, in the process, narrow down search lists and thus saving time and effor, it is critical that a buyer determine what price bracket within which they can search for a property by speaking to the vast number of lenders or mortgage brokers who will perform an affordability assessment prior to them commencing a search for property. Most will be able to issue what is referred to as a "pre-approval" that the buyer can eventually use in their negotiations with agents on any desired property.
Ideally, buyers should strive to accumulate the highest possible deposit before deciding to buy property to minimise the amount they need to borrow. This will also minimise the amount of interest that will eventually be paid. Most lenders will generally require an owner occupier borrower to provide a deposit, but some lenders may be prepared to lend on a smaller deposit depending on the borrower's financial commitments and the amount of security they can offer (for example, equity in an existing property).
Interest rates are an important factor when choosing which home loan provider. Property buyers should take into account the potential for interest rates to rise once their loan is established and ensure that they allow a buffer to enable them to make higher repayments should this occur. Fees and charges are also vary considerably between each lender and must be declared by each lender prior to a buyer entering into a loan agreement. Some lenders may require the borrower to carry mortgage insurance, depending on the amount the borrower requests. Mortgage insurance protects a lender against any loss should a borrower default on their loan and the buyer typically bears the cost of mortgage insurance for the lender.
Those looking at buying a house can expect to incur fees and charges over and above the purchase price of the house and bank charges. These costs include legal fees, stamp duty, transfer duties and insurance premiums and will vary depending on the purchase price and must be factored in when making application for finance with the lender.
It must be stressed that it is highly advisable that buyers talk to their bank or mortgage broker before they start the task of property hunting so they know what boundaries or limitations they may have.