6 hurdles first home buyers face—and how to conquer them.

Owning your first home is an exciting milestone, but the path to homeownership has its challenges. We’ve identified six common hurdles first-time buyers face, and with a bit of preparation, they can be easily overcome.

1. Credit Scores: Understanding & improving yours

Credit scores are a key factor lenders consider when assessing your home loan application. In Australia, scores range from 300 to 850, reflecting your financial history. A low score can limit your borrowing capacity or result in higher interest rates.

Tips to improve your credit score:

• Avoid unnecessary credit cards or loans: Extra accounts can hurt your score.
• Pay bills and debts on time: Unpaid bills can stay on your report for years.
• Limit credit enquiries: Each application slightly lowers your score, so apply only when necessary.
• Monitor your credit report: Use platforms like Equifax or Experian to check your score and correct errors.

A higher credit score means better lending terms, potentially saving you thousands in interest over time.

2. Employment history: Building stability

Lenders prefer applicants with at least two years in the same job or industry, which can be challenging for young professionals or recent graduates.

Ways to overcome this hurdle:

• Show steady income: Consistent earnings, even from different employers, may still qualify you.
• Consider alternative lenders: Some non-traditional lenders have more flexible criteria.
• Provide additional documentation: Savings, recent promotions, or other proof of financial responsibility can boost your chances.

3. Saving for a Deposit: Challenging but possible

A 20% deposit is tough for first-home buyers, especially with rising prices, but it helps avoid Lenders Mortgage Insurance (LMI), which can add thousands in costs.

Options for first-home buyers:

• First Home Guarantee Scheme: Buy with as little as 5% deposit, LMI-free.
• First Home Owner Grant: State grants of $10,000–$20,000 may be available.
• Stamp Duty concessions: Some states offer exemptions or concessions, saving you thousands.

Even with these options, disciplined saving is essential. Set goals and use savings calculators to track progress.

4. Making mortgage repayments

This one may sound simple, but repaying your mortgage in full and on time is key to maintaining a good credit score. Mortgage payments are often higher than rent, especially in pricey regions. This can be a financial shock for first-time buyers.

Tips to stay on track:

• Budget for rate increases: Interest rates fluctuate, so leave room for future rises.
• Build an emergency fund: A buffer of 3-6 months’ expenses helps cover unexpected costs.
• Consider a fixed-rate loan: It offers stability if you’re worried about rate hikes.

5. Stay informed: don’t ignore the housing market

Once you’re a homeowner, it’s crucial you stay informed about property values and market trends so you can make smart financial decisions in the future.

• Property cycles: Knowing market trends helps you time a sale or refinancing.
• Avoid financial stress: Understanding your home’s value allows for quicker decisions in tough times.
• Plan ahead: Tracking your property’s growth aids in setting long-term goals, like upgrading or investing.

You don’t need to obsess over listings, but regular checks on your property’s value will keep you informed.

6. Unexpected costs: Be prepared for more than just the deposit

First-home buyers often focus on saving for a deposit but can overlook other significant costs involved in purchasing and owning a home. These can include:

• Stamp duty (if you’re not eligible for concessions),
• Lenders Mortgage Insurance (LMI) if your deposit is less than 20%,
• Council rates, home insurance, and maintenance costs.
• Conveyancing and legal fees to handle the property transfer. Planning for these costs ensures you avoid financial stress later on.

Conclusion

Buying your first home is a huge achievement, and while it comes with challenges, each can be managed with the right strategies. By tackling your credit score, building savings, and staying informed, you’ll not only become a homeowner but also create a solid foundation for your financial future. Start planning today—your dream home is closer than you think!

If you need help with your home loan application or understanding the grants and schemes available for first-home buyers, talk to your friendly Nectar broker—first-home buyers are our passion!