Best advice for first first home buyers
1. Be informed about government schemes
It’s tougher than ever for young people to buy a home, but there are some advantages to being a first home buyer.
Max Phelps, author of Getting your money $hit together says, “Take advantage of every scheme possible for first home buyers - First Home Loan Deposit Scheme, FHB grant, stamp duty concessions and consider family guarantees to help preserve savings, or buy sooner. For those with a couple of years to save, the First Home Super Saver Scheme is a great way to save up to $7,500 in tax, by salary sacrificing.”
2. Don't try to time the market
There isn’t going to be a perfect time to buy. If you have your finances in order and are excited to buy your first home then Max says to “take action”.
“When you're ready to buy, find the right property and take action,” he says. “As long as you can pay down the mortgage, or build up an offset quickly, it won't matter what the market does.”
Sure, your first house might not be your dream house. But the last thing you want is to be stuck with a lemon. Conduct your own independent pest and building reports and make sure there is nothing wrong with the property.
Additionally, Max says to go to as many open houses as you can.
“Keep notes on the size, aspect and conditions of each property, what the agent says the price guide is and what it finally sold for. Looking online won't show you why some properties sell for a lot more than others in the same area, nor which agents under-quote more than others.”
4. Talk to a mortgage broker before you're ready to buy
A loan that works for one homebuyer might not work for another. There are a lot of finance options available and different types of mortgages to suit different circumstances - that’s why finding the right mortgage broker is essential.
Peter Schravemade, Managing Partner for REACH Australia, says, “Quite often the Banks will only give you their version of what is possible to lend. Mortgage brokers can be wonderful at pairing the right loan to the right person. A lot of them also have greater flexibility to recommend more products to you. A good mortgage broker is worth their weight in gold.”
5. Improve your credit rating
These days It’s pretty simple to find out your credit rating online using a free or paid credit score or report website.
To improve your score, Peter says you can do things like “pre-paying bills, and ensuring credit cards and utility bills do not go into arrears over a period of time (6 months). Sometimes you may need to seek professional help to remove black marks on your credit rating.”
6. Look great to a bank
After improving your credit rating, it’s time to get rid of anything “that looks like debt to a bank.”
“Dispense with unnecessary credit cards, store credit,” says Peter. This includes Afterpay!
“Also, work to increase your savings. Cutting unnecessary spending is also a great move here as sometimes banks will look at your cost of living per week against your earnings.”
7. Be aware of your serviceability
Peter says, “This is simply lending speak for calculating your earnings vs your living costs. If your living costs are higher than your earnings, then you need to reconsider your living costs.”
Are there non essential costs that you could cut from the budget?
8. Be Patient
It can start to feel like groundhog day when you are looking for your home - every weekend becomes spent looking at houses without any success - but Peter says not to feel disheartened.
“This is perhaps the hardest part of first home buying,” says Peter. “Don't lose faith in the fact that a property is out there with your name. Be prepared to not purchase, before emotionally committing.”
9. Consider rent vesting
John Manciameli, Mortgage Broker and Buyers Agent, for HUNTERWOOD says a lot of first home owners are becoming 'rentvestors'.
He says, “This involves renting in the suburb you can't afford just yet and starting the property journey as a landlord in a suburb with strong growth prospects. Rinse and repeat. You then sell the portfolio and then buy into the suburb with cash or atleast a big deposit.”
"It’s great to know that 70% to 80% of the capital growth comes from the suburb and not the property. With 15,500 suburbs in Australia, first home owners will be pleased to know that there are significant opportunities available to them."
10. Don’t overextend yourself
Really think about how much you can afford to pay back on your mortgage. Is it worth buying a home but then never having any money to go out for dinner, go on holiday, or meet daily living expenses?
CEO and founder of Stockspot, Chris Brycki says, “Only borrow what you can pay back. Even though rates are low, take into account interest rates rising to at least 7%.
"But also, you need to factor in other costs like council rates and repairs to the property. The RBA estimates the average Australian household needs around 2.6% annually for costs related to home upkeep and associated rates."