Like many ‘firsts’ in life, buying a home is something on most Australians’ to-do list. It all sounds very exciting at the start, but soon you may feel overwhelmed or confused about how to begin the whole process. Don’t let it dampen your motivation to move forward! Once you’ve got an idea of the steps you’ll need to take, it doesn’t sound as complicated as you think it is. The key things to prepare are your finances, determining what you can afford, and how you will be paying for your first home.
Step 1: Work out a budget
This should be your first and most important step. Look at your finances and other assets that you might have. How’s your savings doing? Having taken all these into consideration, work out how much you have available to spend on a home. Some of the important expenses that come when purchasing a property include the deposit, legal fees, property inspection, and in certain cases, stamp duty. Don’t forget to consider moving and repair (if necessary) costs as well!
Step 2: Understand the market
Once you’ve got your budget figured out, the next step is to understand what the current market situation is. Depending on your location of interest, your buying power may vary. If you’re looking at a fancy neighbourhood, your budget may only be able to afford you a small space. Compare that with a developing suburb and you are likely to have more options from a selection of decently sized homes. By researching the property market, you will find out if you are financially prepared or if you need to put this plan on hold and focus on building your savings.
Step 3: Are you eligible for a mortgage?
Unless you’ve got millions of dollars in cash, there is a sure chance you’ll need to apply for a home loan. You can always use a mortgage calculator to see how much you might be able to borrow, but then again this should only be treated as a guideline. There are certain things within your control that you can check to help increase your chances of being accepted for a home loan. For example, you can check your credit file for any defaults and familiarising yourself with eligibility rules that lenders have put in place.
Step 4: Firm up your budget
While a mortgage calculator will give you a rough idea of the loan size, doing your own calculations will reflect a more accurate amount of what you can afford to borrow. Once you’ve solidified a budget, browse the various home loans available to get an idea of the repayments you’ll need to commit to monthly. If you want, you could also seek out a broker who can help determine a suitable home loan package for you. Don’t forget to consider your deposit and other buying costs at this stage.
Step 5: Government grants and concessions
You could also be eligible for financial help from the government when purchasing your first home. This will alleviate some of the financial weight and you can be a homeowner sooner rather than later. Some of the these include first homeowner grants offered by the state government, stamp duty concessions, and First Home Super Saver Scheme (FHSSS).
Step 6: Act on your finances
Once you know what you can afford and where you’d like to buy, it’s time to act. If you have not already saved for a deposit, you need to do it now. If you’ve already saved a considerable amount of money but feel like you want to save more for added security, then keep at it. Any lingering debts should be sorted out as soon as possible. Credit card debts are usually fine, so long as you have a good track record of paying it off every month. Another important thing is getting a pre-approval, which serves as proof that you are in a good position to purchase a property.
Step 7: Apply for a Pre-Approval
Pre-approval confirms you’re eligible to apply for a home loan up to a certain amount. Essentially, the lender checks your financial circumstances to decide if you meet their criteria and can afford to repay a mortgage. It is also a recommended first step to your property search because of the numerous benefits it can give you. Finance Focus talks about these benefits here.
Step 8: Start the hunt!
The time has finally come for you to search for your first home! Go through the shortlisted properties you’ve saved when you were window shopping and narrow down to what your budget permits. If you’ve not already began browsing, now’s the time to prepare a checklist of the must-haves you want in your new home. There will be some things you’ll have to compromise, unless you’re lucky enough to find a property that checks all the boxes!
At FutureNow Finance, we can help you in your journey towards purchasing your first home. Contact us today if you’d like to discuss your options. Call 1300 013 730 or email hello@futurenowfinance.com.au.
If you know anyone interested in purchasing their first home, share this with them. You could help them with valuable information on how to buy their first home.