Hordes of first home buyers are taking advantage of record-low-interest rates and jumping into the property market. If you too have the first home itch, it’s essential to ensure you are truly ready for the biggest financial commitment of your life.
In addition to a healthy deposit, we’ve put together a list of 10 signs you’re ready to buy a home to help guide you through this next exciting stage of your life.
You have a deposit saved up
Unless you’re lucky enough to have someone in your life go guarantor for your home loan (which still has its pros and cons), a decent-sized deposit is an obvious sign you’re ready to buy a home. For a smaller mortgage and less interest paid over the life of the loan, a 20% loan is the sweet spot. If a 20% deposit is a little out of reach, then a 10% deposit will still get your foot in your own front door – with the added expense of Lenders Mortgage. The government’s recent efforts to revive Australia’s COVID economy have included a number of incentives for first home buyers like the First Home Loan Deposit Scheme and the First Home-Owners Grant, which could potentially help get you into your first home without a 20% deposit.
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Your job is secure
For the bank’s peace of mind and your own, a secure job is a vital sign you’re ready to enter the property market. Of course, a bank will be looking at your employment history and the current terms of your employment to determine whether you will be able to consistently make your repayments. Additionally, waiting until you have a steady income will also help you feel confident enough to take on the financial commitment
You’re debt-free (or almost debt-free)
Our twenties are typically a time where people accrue debt, as we learn to manage our finances – HECS, credit cards and car loans etc. Your existing debt may decrease the amount you can borrow or even dampen your chances of getting approved at all. If you have managed to abolish your debt or even whittle it down to a manageable amount, it may be a good sign you’re ready for homeownership. Managing your debt will show the banks, and yourself, that you have the money management skills to take on a mortgage.
You have a good rental history
A good rental history is not a vital sign that you’re ready to buy a home, but it is a good indication you have the stability needed to shoulder a mortgage. With rents on the rise, some lenders will even take a stable rental history as genuine savings, as they show the ability to make regular repayments.
You’re prepared for the extra costs
There is a multitude of extra costs when purchasing a home; conveyancing fees, stamp duty, pest and building inspection costs, loan establishment fee and much more. For a $500,000 home, these fees could potentially lead to $10,000 to $20,000 of extra costs. Of course, a deposit is an excellent sign you’re ready to enter the property market, but saving a bit extra on top will guarantee you are completely prepared for any financial surprises that might come your way.
You’re committed to stability
Our younger years are also a time for going with the flow, changing with the wind, which equals many, many rental properties. If you’re tired of the nomad life and ready for some stability in your life, it might be a good sign you’re ready to purchase your first home. Owning a property allows you to put down roots in a way a rental does not – no more dealing with flaky roommates, the risk of eviction or living with the hideous or outdated design choices of our landlords.
You have a good credit score
To a bank, a good credit score is an excellent indicator that you will be able to service your loan. A credit score is the culmination of any debt you hold or have held in the past, any applications for finance (whether successful or not) and your repayment history. If you achieved a glowing credit score by being a responsible debt owner – it might be a good sign you’re ready to buy a home. You can check your credit score at a number of reputable websites, including Cantar.com.au, or go straight to the three credit reporting bodies – Equifax, Experian and Illion. Never fear if you find your credit score is a little worse for wear, as there are plenty of ways to boost it with a bit of time and effort.
You can stick to a budget
Having a reasonable, realistic budget that you can stick to is a fantastic sign you are ready to commit to your first mortgage. Your lender will need to see proof that you can adhere to a budget, usually needing to see at least three months of bank statements to demonstrate if you are spending responsibly. Undoubtedly, budgeting played a massive part in saving for your deposit, so it should be easy to prove your budgeting prowess to the banks.
You understand the market and what you can afford
A solid understanding of the market and what kind of property your budget and deposit can get you is a vital sign you are ready to enter the market. You need to understand current buying trends, sale price versus asking price and competition to ensure it’s the timing and price are right for you. Not understanding the market could see you paying over your budget at auction or properties slipping through your fingers. Searching real estate sites and getting market information from up to date, reputable sources will help you get a clear overview of the market.
You have a healthy emergency savings account
An emergency fund is a must for anyone but especially essential for homeowners. A healthy emergency fund will allow you to continue to make repayments in times of financial uncertainty – like illness or injury.
An emergency fund also comes in handy when you need to make quick repairs to your new property. Gone are the days where a quick call to your landlord can remedy a broken heater or leaking tap.
How can we help?
If you tick most of the above boxes and believe you’re ready to start looking for your first home, one of our Mortgage Brokers can guide you through the entire process. We will do all the heavy lifting for you, comparing hundreds of home loans to find the one that fits your financial and personal circumstances.
We can also help you with pre-approval, which is a must in the current fast-paced market. A pre-approved loan simply means that the bank has agreed to lend you a certain amount, but the loan hasn’t been finalised yet. Having pre-approved finances means you can confidently make an offer on a property, knowing you’ll be able to gain access to finances, ultimately making you a more attractive buyer.
Being approved for a specific amount will also help you to shop and buy within your budget.
Applying for pre-approval is basically the same process as applying for a home loan, and an eChoice Mortgage Broker can manage both processes for you and make sure becoming a homeowner is as stress-free as possible.
Words by Nell Matzen
Looking for a home loan? Contact eChoice. With access to 100’s of mortgage products from over 25 different lenders, eChoice brokers have the resources to help you find the perfect home loan to suit your needs. Best of all? We do all the paperwork!