5 hurdles for all first home buyers
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 that 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 homeowner 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 than moving it around.
- Try to pay all outstanding bills on time.
2) Employment history
Some banks prefer to lend to people who’ve had sustained work at the same business for at least two years. This can sometimes be tough for first home buyers as they’re usually young professionals building their careers.
Not all is bad though. Most lenders 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. With inflation, saving a 20% deposit can be a challenge for first home buyers.
Thankfully, the Government has come to the party with the Home Guarantee Scheme that allows you to purchase with as little as 5% deposit without paying Lenders Mortgage Insurance (LMI). Most states also have a first home owner’s grant or stamp duty discounts that can save you thousands on your purchase.
4) Making mortgage repayments
This one may sound simple, but making your repayments in full and on time is crucial for any future lending. Depending on what area you purchase in, your mortgage repayments could be a little or a lot more than rental payments.
Being prepared for larger repayments, especially if interest rates rise, means budgeting should become a big part of your finances.
Don’t forget: To keep a little more aside each paycheck 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 listing websites every day, but having a general feel for what your property is worth over the coming years will help with this.