by Lisa Montgomery, Head of Consumer Advocacy 26/06/2007

Many first home buyers make the mistake of launching into a round of property inspections without really knowing what they can afford to buy and all the associated costs involved. This can be a formula for disaster.

One wonders just how many real estate agents have seen people fall in love with a home, only to find out that they can’t sensibly afford to buy it. They then must face the disappointment of missing out or, perhaps worse still, end up over-extending themselves to buy a property which is out of their price range.

The best idea is to sort out your finances first. Visit a lender, or even a range of lenders, and find out how much you can afford to borrow and what kind of loan options are available to you.

When it comes to choosing a lender it’s worthwhile doing your research first. Look at the rate tables published in most metropolitan newspapers, check the website of independent financial research agencies such as Infochoice.com.au and Cannex.com.au, get advice from family and friends, and ring around several lenders to find out more about the loans they have on offer.

This can be a big decision that will affect your finances for years to come. So don’t be afraid to look ‘outside the box’ to find the best loan deal. Also make sure you seek out the type of loan you really need – whether it be one with lots of flexible features or a more basic loan.

When you contact or visit a lender, ask them to itemise all loan costs involved – including application fees, ongoing fees, mortgage insurance, government stamp duty, legal fees, and valuation fees.

They should also be able to let you know about any government grants you may be eligible for, such as the First Home Owner Grant.

The lender will be able to assess your borrowing capacity based on your income, your living costs and your savings. However it’s worthwhile also doing your own budget to make sure you would be able to pay your mortgage and still afford the things you don’t want to go without.

Once you’ve chosen your lender and worked out how much you can comfortably borrow it’s a good idea to apply for loan pre-approval. This means that your finances are approved, subject to your choice of property and its valuation. Importantly, it means that you are now in the position to search for a home and put in an offer for a property - or make a bid at an auction - in the knowledge that your finance is in place.

To view part 2 "Researching the property market", click here

For help with selecting a Resi home loan, click here.
To find you local Resi branch, click here.

To get a Resi mortgage specialist to call you, click here