The one thing you should do before going house hunting this year!

You wouldn’t go shopping without your wallet, and by the same token, you shouldn’t go house hunting without knowing what you can afford to buy.

House prices increased the most in Sydney, up 1.3 per cent. Perth house prices rose 1.2 per cent to reach a new record high, while Adelaide also set a new price record with a 0.4 per cent gain. Prices remained stable in Melbourne and Brisbane, indicating these cities may be at or close to the bottom of the price cycle.

Add into the mix the pressures of population growth and it appears buyers looking to purchase a home this year could be entering a rising market.

What you need to do before going house hunting:

In a changing market, a simple mistake buyers can make is spending time inspecting properties they can’t afford, let alone house hunting without actually knowing their borrowing power.

Knowing your borrowing capacity is crucial, especially for first-home buyers, as the amount you will be able to spend on a property will depend on how much a bank will be willing to lend you.

Your borrowing power will also help you determine where you can afford to buy, so you can narrow your search to areas and properties that fit your budget.

Buyers with pre-approval can still shop around and compare loans and lenders once their offer has been accepted or they have bought a home at auction.

When prices rise, buyers’ ideal properties become harder to purchase and more compromises need to be made. This problem can be compounded if buyers who aren’t certain about their borrowing capacity waste time searching in areas that their budget won’t cover.

On the other hand, if you have a clear idea of your buying power, either through home loan pre-approval or initial conversations with a mortgage broker or lender, you will be able to confidently search for properties in your price range, saving time and getting you into the property you want sooner.