I’m a first home buyer – HELP!
First, don’t panic. Although it may feel that way, you are not the first person to buy a house and you won’t be the last. Almost a quarter of people buying houses are first home buyers.
When buying a home, particularly your first, it is important to be organised. Your credit rating needs to be good, your existing debts should seem manageable and you must look as though you have a stable lifestyle. There are several things you can do to prepare for the application and you might want to start a year in advance:
- Clear as much as possible of your credit card debt and loans
- Make sure you pay your bills promptly – and have been doing so for some time
- Start building a savings buffer – any extra money will help
- If you’re planning on changing job, do it a year before you apply for your mortgage or wait until afterwards, so that you have stable employment.
Save, save and save
Ideally you need at least a 20% deposit to avoid paying the Lender’s Mortgage Insurance (that covers them, not you, if you default) on a no deposit loan. Or you could jump through the hoops of arranging family equity or some other scheme to underwrite the deposit.
Only a rare first home buyer can afford to buy a property like their parents’ as a first home. In fact, many first home buyers can’t afford a property as nice as the one they are renting. So try to be realistic about what you can afford and be open-minded about property types and locations.
Be pre-approved and ready to buy
Talk to me about the pre-approval of your loan: that’s an in-principle agreement from the bank about how much you can borrow, assuming that all the paperwork is in order. Armed with a pre-approval you can bid confidently at auction or negotiate hard in a sales campaign, knowing exactly what you can afford.
Use a deposit bond at auction
Investing savings in shares or other investments helps you save, but is problematic at auction where you need to pay the deposit on the fall of the gavel. A deposit bond allows you to leave your money invested while, for a small fee, the bond issuer underwrites your deposit. If you win at auction then you sell your shares and pay the deposit in cash a week or two after the auction. If you don’t win the bidding then your investments remain untouched and you have only paid for the bond – which is usually re-useable for a month or two.
You must clear the use of a deposit bond with the vendor before bidding at auction.
Use a broker
Above all, talk to me – I apply for mortgages and deal with new buyers all the time and I can guide you through the process.