Home Buying Tips & Questions

How much house should I buy or how much can I afford?

The answer to this has a lot to do with your income and the amount of your debt load. As a rough rule of thumb, most home buyers purchase houses that cost between 1 1/2 and 2 1/2 times their annual income. For example, a home buyer earning $40,000 per year would buy houses costing between $60,000 and $100,000. There is, however, a degree of variation due to the individual market prices of the area in which you are interested. In some areas, there may not be houses available within that range, so you may need to spend a bit more. In general, however, your monthly mortgage payment cannot exceed approximately 28%-29% of your gross monthly income. Your total debt payments (car payments, credit card payments, etc. plus the monthly mortgage amount) cannot exceed approximately 36%-40% of your gross monthly income. These ratios will depend on the type of mortgage for which you are applying. For more information on mortgages and to begin the application process.

Do I really need to use an Agent to buy a house?

No. Should you use an Agent to buy a house? Probably, for two reasons. First, in virtually all situations, the buyer does not pay a commission, so the services of an Agent are paid for by the seller. Second, without an Agent, you may be missing valuable representation of your interests. For example, A real-estate agent is bound by the sale of goods act, The real-estate agents act and many others. These are designed to give you, the purchaser, protection against misrepresentation fraud, and other nasty occurrences. Private vendors are not normally bound by these Acts and if things go wrong with the purchase it will be up to you to seek recompense through the courts.

How do I know if I am getting a good deal on a mortgage?

In a word: Compare. There is a good deal of variation in the mortgage market, not only from week to week, but from lender to lender. Many newspapers list current mortgage rates for your local area in their Real Estate sections, often on Saturday or Sunday. Check them.

How much should I offer for a house?

Two of the most frequent questions we receive from potential home buyers are "how much should I offer for a house?" and "What is the normal concession from the selling price?" There are, unfortunately, no stock answers to those questions. Real Estate does not have an established selling price nor a specific cost. There is no RRP (Recommended Retail Price) for a house. So, it is impossible to give "standards" as to what is either fair or normal. Every property stands on its own price and merits. One method people commonly (mistakenly) in use, is to take 5 to 10% off the asking price. This practice often gives vendors and purchasers a good point to start negotiations from when the list price is close to the market value. If the vendor has priced the property very high because he is only "testing the water" things may not go well when a registered valuation for the mortgage comes in way lower than what you offered. On the other hand if the vendor priced the property for a quick sale, but was prepared to wait for the asking price you may miss out on the property to other purchasers.
If you have any doubts about the fair market price for a property, call in a registered valuer, they can provide you with information about the property and comparable sales. This Valuation can be used by your lending institute for mortgage approval purposes, this is especially useful if the Registered valuation differs significantly from the Government valuation.
One thing to remember with Valuers, Lets say you decide that you like a property and are prepared to offer $100,000 for it. You call in a valuer, and he asks you what you are prepared to offer the vendor, so you tell him, he then heads off to the property inspects it and writes his report. The reports states "We assess the current market valuation at $100,000…with a willing buyer and a willing seller in an arms length transaction".
You were the willing buyer, the vendor was the willing seller & $100,000 was the market price, you told him that. However, if the value of the property is blatantly is outside this price (vendor or purchaser motivation) or it is outside the price range for comparable properties, the Valuation will reflect this (they still have to do their homework).
I you feel the Valuer has missed something that will add or detract to the value of the property don't be afraid to point it out. If they feel its significant enough they will change their valuation

Should I spend the money to have a home inspection?

Absolutely. The $200 to $500 that a professional home inspection costs could be the best money you ever spend on your house. Not only does the home inspection seek out any defects (and gives you some peace of mind), the home inspector will often give you tips on maintaining and repairing your house.

What is a LIM?

A Land Information Memorandum is a declaration obtainable from you local council that details all the legal specifics of the property you wish to purchase. It contains such information as building consents, easements and legal description. LIM's may take up to 10 working days to obtain.