Whether you are buying your first home or an investment property, you need to be prepared for the hectic process you are about to go through. You may have already seen some properties that you like, but before you go ahead and make a purchase, here are some things that you need to do:
If you are upgrading or downgrading from a property that you currently own, you can find out how to get your old property ready for sell on this blog.
Get your Financing in Order
How are you going to pay for your new property? You should start getting your financing in order as soon as you decide to purchase your next property.
First of all, you should take steps to improve your credit score; if you have a high credit score, you are more likely to get a better mortgage deal. Cross-check your information with credit reporting agencies, and make sure that you make timely payments on all your loans.
Secondly, based on your income, savings, loans, and your preferences figure out what kind of property you can afford as well as your price range. Ideally, your monthly payments on the property shouldn’t exceed one-third of your monthly income.
Thirdly, you have to save up for your down payment. The down payment may also include stamp duty, lender’s mortgage insurance, and other closing costs. Your down payment depends on your lender’s terms; some lender may insist on 20%, but others may be willing to go as low as 5% or even 3%, so shop around for a lender with fair rates. If you have healthy savings in the bank, you are more likely to get good financing because this tells lenders that you don’t live pay cheque to pay cheque.
Finally, you should try to get preapproved for a mortgage before you even start attending open houses and checking out properties.
Do your Due Diligence
Check the Property Ownership History
You should look into the ownership history of the property; this will help you understand why the current owner is moving, and it could give you some leverage as you negotiate a favourable price. The history of the property can also tell you if there have been any problems in the past. For example, there are cases where unsuspecting buyers have closed deals on properties only to find out later that those properties were used by criminals to manufacture crystal meth, and they were chemically contaminated. As you look into the property history, pay attention to details such as how long the last owner stayed, and whether the property has been foreclosed on in the past.
Research Insurance Costs
Find out what it would cost to insure the property before you decide to buy it. If the house is in an area that is prone to floods or bushfires, you may be surprised to discover that the insurance premiums are much higher than you expected. Insurance is a big problem especially in flood zones; you may find that it’s too expensive or that it’s even quite difficult to get a company that’s willing to provide coverage. If you can’t find reasonable insurance premiums for a property, you might want to consider buying a different property altogether.
Research the Location and the Neighbourhood
Location is the most important consideration in any real estate deal. Whether it’s your new home or it’s an investment property, you have to consider where it’s located. Is it in a good neighbourhood? Is it close to schools, hospitals, public transportation terminals, or other services? Visit the local police office or look through news websites to find out if the area is prone to crime. If you are working with real estate agents, you may be able to ask them questions about the neighbourhood. You can also try to find out about upcoming projects in the area that may have an impact on the value of the property.
Look into Potential Environmental Problems
There may be environmental problems in the property or the surrounding area that may pose serious risks to the residents. Hire an environmental consultant to test your property for radiation, chemical contamination, toxic mould, or anything else that could create a health problem.
Inspect the Property for Structural Defects
Before you buy a property, you should independently verify that it is structurally sound. Have the property inspected for any defects; if anything is discovered after you have closed the deal, you will bear responsibility for fixing it. The last thing you want is to spend a fortune paying for costly repairs that you did not know about. If your inspector discovers any defect, you can notify the seller and try to factor it into your negotiations.