Owning your first home can be scary and exciting all at the same time. After chatting to past clients, we‘ve worked out 5 hurdles most people encounter when owning their first home.
If you or someone you know are thinking about dipping their toes in the property market for the first time, keep an eye out for the following:
1) Credit scores
Don’t know what a credit score is? Your credit score is a 3 digit number which scores how wisely you’ve handled your finances in the past. Credit scores range from high 300s through to low 800s.
Your credit score is one of the first things your broker checks when determining how much you can borrow for your first home.
Remember that car payment you forgot to make, or that unpaid credit card bill? All of these pile up and lower your score. The lower your score, the less you’ll be able to borrow down the track.
We know being a first home owner may mean your score is lower because you don’t yet have an established financial history. But there’s still a bunch of things you can do to ensure your score is as high as it can be.
- Don’t take out a credit card if you don’t need it.
- Don’t borrow money, unless it’s essential and can be paid back.
- Pay off any debt rather that moving it around.
- Try pay all outstanding bills on time.
2) Employment history
Brokers prefer to work with people who’ve had sustained work at the same business for at least 2 years. This can be tough for first-home buyers as they’re usually young professionals building their careers.
Not all is bad though. Most brokers will overlook a short employment history if you can show a steady sustained stream of income that is high enough to cover any housing repayments.
3) Saving for a deposit
Saving – everyone’s favourite financial word. As long as you stay motivated to put aside some cash from every pay check, most Australian’s can save enough for a 20% deposit in just over four years.
It may seem like a bore now, but being able to front a deposit will keep away any additional interest rates, as well as stopping you from having to pay lenders insurance.
Don’t forget: Most states have a first home owner’s grant which lets you save thousands on your deposit.
4) Making Mortgage Repayments
This one may sound simple, but making your repayments in full and on time is crucial for any future lending. Being a first home owner may mean your repayments are more than what you’ve been used to paying in rent, but the benefits on paying these outweigh rent payments.
Getting used to these larger payments mean budgeting should become a big part of your finances. Our handy Nectar budget calculator will help with this.
Don’t forget: To keep a little more aside each pay check for those unfortunate surprises that like to pop up at the worst times (medical bills and property maintenance etc…).
5) Ignoring the housing market
Once you’ve gone through the process of finding your dream home, saving for a deposit and finally moving in, most people switch off and like to forget about the property market.
But being able to choose when you sell your home, rather than being forced to sell due to job relocation or financial stress will keep you in control and give you peace of mind.
Don’t worry – we’re not saying you should keep an eye on realestate.com.au every week, but having a general feel for what your property is worth over the coming years will help with this.