What to consider when buying your first home
Are you looking to finally get into the real estate market? Do you know what to consider when buying your first home?
There are 5 top things you need to do before you leap into buying your first house.
1. Get professional home buying advice
It might seem pretty straightforward, but the first thing you should do is reach out to a finance professional to go through your financial situation to determine your lending capacity.
You can choose to shop around different banks to gain this advice or you can simplify the process by speaking to a mortgage broker. A broker will not only help you determine what your lending threshold is, but will be able to advise which lender and which home loan option is going to be suited to your particular situation.
Certain lenders are better suited to different life situations.
2. Get your deposit together
Do you have a deposit ready to buy your first home?
There are a few ways you can get a deposit together:
- Simply save up the money, by either putting away surplus money you have or reducing your spending to open up cash.
- If you're gifted money, you can put this towards your deposit. The important thing to keep in mind is you need to have it for at least three months for it to be classed as genuine savings. And that's three months in an account in your name or your or your joint names.
- Less common at the moment, but some lenders are still offering your family guarantee or family pledge.
The main goal is to build up a 20% deposit to avoid lenders mortgage insurance.
If you're struggling to come up with the 20% deposit, or even a 10% deposit, you can also learn more about our 98% home loan ideally suited to first home buyers struggling to generate a deposit.
3. Stable or suitable income
It's important to make sure you have stable or suitable income before applying for a loan.
Unfortunately, all banks look at things differently and don't always include all types of income as "income".
So if you're a casual employee, and you've only been there three months with no experience in that industry, it can be hard to find a lender who's going to take on your loan. You may need to be there for a year.
With self employed, you need to be able to show income over a two-year period.
This is why it's so important to reach out to a mortgage broker who can source the right lender and loan option for your needs. They're aware of which lenders accept different types of income.
4. Reduce or eliminate debt
One of the biggest challenges for first home buyers is debt. It's tempting to get a new car or a personal loan to pay for that holiday.
When it comes to getting a home loan, realistically, you want to have no debt if you can. Pay off that car loan as soon as you can.
But if you're unable to pay it off completely, the next best option is to have a small a figure as possible. So if it's $70 a fortnight, that's fine.
But ideally, if it was nothing, that would be better.
Other thing to keep in mind with debt is that a lot of people get caught out with things like AfterPay, which is very popular now. However, a lot of banks are calling that a debt. So this can catch you out.
For example, buying something for $400 is only four payments or $125. However, on a loan application, that could push you outside the line of being accepted a loan.
5. Tighten your expenses
The final step on what to consider when buying your first home is your expenses. Often, this is the hardest one of all.
Most people spend what they earn, which is quite normal. You need to be conscious that in today's environment lenders are going to go through three months' worth of your expenses in detail.
They're going to see if you're withdrawing $100 at a time at the TAB or you spend $600 a month going out on the town. They're the type of things that a lender is going to go through.
Ideally, for three months in the lead up to actually getting a loan application, keep those expenses down.
5. What's next?
Now you know what you need to do to put your best foot forward, you have three options:
Get a Home Loan Review
If you have any questions about your situation, what threshold you fall into as a first home owner or how you generate an income and whether it qualifies, reach out. If you happen to go through our free 15-minute review process, you'll also qualify for an entry into our Hawaii Holiday promotion.
Access a 98% home loan
You can also learn more about our 98% home loan ideally suited to first home buyers struggling to generate a 10% or 20% deposit.
Free Financially Fit Bootcamp
Alternatively, put yourself in the best possible position to be approved for a loan by taking the FREE online First Home Buyers' Financially Fit Bootcamp. Just sign up and you'll start receiving insider tips and tricks to ensure you're ready to buy.