So, you’re a young home buyer?
I see first home buyers all the time. They come into my office and assume that because they are paying rent, they should be able to buy their own home.
Sounds logical, doesn’t it?
The reality is there is often some more work to be done before you can qualify for buying a house at a young age, or any age at that matter.
So, here are my tips for first time buyers on how you can enter the property market sooner rather than later:
Save a 5% deposit
You may need at least 5% of the purchase price plus costs – saved over 6 months minimum. When you are told that you need at least a 5% deposit, remember that you will also need to cover other costs which might include: stamp duty; registration and transfer of title; solicitors fees; Lenders Mortgage Insurance; and maybe some loan set-up costs. These costs will change from bank to bank and state to state. Speaking to a mortgage broker will help you work out what you will have to pay and what deposit you will need.
You need to be in a stable job and have been there for at least 3 months – the longer the better and preferably past your probation date. There are VERY few lenders who will allow you to still be inside your probation period. So if you’re planning on buying at a young age, don’t switch jobs. Stick things out until you’ve signed those mortgage papers and are moving in to your new home.
Do your tax return if you’re self-employed
If you are self-employed, you will need 2 years of tax returns – showing that you earned an income!
How’s your credit history?
Young home buyers will need to have a good credit report with no late payments or defaults listed. You can get a free copy of your credit score and see your history via the Credit Savvy website, so that you are aware of any activity on your report. This will show any recent loan or credit cards you have applied for as well as any defaults or bad credit you have had in the past so be upfront with your broker so they can find the right option for you.
Be realistic about your first property
Sometimes you will have to look at smaller properties or units or buy in a different area than you first envisioned. Your first home will often only be your starting point in the housing market, on your way to your dream home. Keep an open mind when thinking about buying and talk to your broker first to see if you can do what you want to do.
Know your numbers
Your mortgage broker will tell you how much the banks will allow you to borrow and how much money you will need in the bank before you go looking.
You will hear terms that may be unfamiliar to you such as:
LVR – loan to value ratio: how much loan you need in comparison to how much your new property will be valued at
LMI – Lenders Mortgage Insurance: if you are borrowing over 80% of the purchase price of your new home, then there is a fee to insure the loan for the lender.
Do yourself a favour and get home loan pre-approval before you go shopping!
Do you have tips for first home buyers to get into property faster? Share them in the comments below!
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