Buying Your First Home

First Home Buyers in Australia are finding it more and more difficult to make the move to becoming home owners. Australian property continues to go up in value every year despite predictions of ‘doom and gloom’ from many so-called experts. Currently Australia is amongst the top 3 most expensive places to purchase a home and investment.

This is the result of the culmination of the high demand and a shortage of housing. Our housing shortage is not as yet adequately addressed by the Federal and State Governments. As a consequence, there is a widespread expectation that Australian Property will continue to grow  in value in years to come.

The problem for First Home Buyers is 3 – fold:

  •  Finding a property that they are able to afford given the high property prices in most parts of Australia;

  • Saving sufficient deposit given that most borrowers need to have at least 5% deposit saved. For a property worth $500,000 it represents $25,000 deposit;

  • Qualifying for the home loan  through your lenders of choice. Since the implementation of the National Credit Code in Australia this year, most lenders are far more conservative than in the past. They need to see ‘proof of income’ and stable employment as well as a clean credit history. If your credit history has some paid defaults you may find that the deposit you are required to have is as much as 20% – hardly achievable for a first home buyer.

Today First Home Buyers make up a very low percentage of all property sales made, and this number continues to decline. If you are a First Home Buyer there are a number of preliminary steps that you can take to make your purchasing process simpler:

Get a copy of your own credit report – this is completely free and will enable you to see if you have any past credit problems that need to be addressed before applying for a home loan.

Find out how much you can borrow – This is absolutely essential as you may be thinking of buying a $500,000 property but your lender may actually say that you can only qualify to borrow $300,000. This happened all the time. You do not want to be shopping around for properties that you are unable to buy.

Comparing Home Loans – Not all home loans are the same. Make sure that you consider your lifestyle needs and income limitations. Your mortgage broker will be able to take you through the different home loan features to assist you in picking the loan that best meets your needs.

Sign your purchase contract ‘subject to finance’ – this is important even if you have already received a loan pre-approval. The issue is that your lender has pre-approved you but not the property you are purchasing. We know of a number of occasions when a lender has failed to assess a purchase property at it’s full purchase price and the borrower was forced to put up additional funds or lose their deposit.

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