Hoping this will be the year you snag your own home? Here are eight things you need to know to get the stars to align.
Last year, worrying your Uber Eats budget wouldn’t have been a thing, but for buyers the lending landscape has changed — and their spending behaviours need to keep apace.
Here are eight things to keep in mind.
1. Banks won’t lend to just anyone
Prior to the Royal Commission, scrutinising a potential buyer’s spending wasn’t mandatory, but now it’s part and parcel of a lender’s process.
“It became more difficult to get finance following the Royal Commission,” says Nerida Conisbee, Chief Economist at realestate.com.au. “It’s unlikely the focus on responsible lending will change much.”
So what does this mean for first home buyers? Yes, the process of getting a loan is more rigorous, but if your saving is consistent and your debt is minimal, you’re still in with every chance of securing the finance you need.
If you sought pre-approval prior to the Royal Commission, you might need to re-check. Picture: Getty
2. Uber Eats isn’t such a good idea
Scouring through your bank statements may sound a bit unnecessary, but according to Adam Kambouris, Suncorp’s Area Manager for Mobile Lending, this is what your lender may do when they’re vetting you for a home loan.
“Since the Royal Commission, we look at an applicant’s financial situation more thoroughly and in much more detail,” says Kambouris. “What this means for first home buyers is that they need to completely understand their financial situation and be able to demonstrate early on that they are capable of meeting repayments.”
He recommends calculating your approximate repayments before applying for a loan and saving that amount.
“Say your rent is $400 per week and your repayments would be $600, start putting the extra $200 away each week before you look to buy a house. That way, you’ll be able to demonstrate to lenders your ability to save.”
3. And neither is Afterpay
If you thought you were being savvy putting every purchase you’ve made in the past three years on Afterpay, think again. According to Kambouris, the bank sees it as debt.
“Afterpay, Zip Pay, it’s all seen as a debt,” says Kambouris. “First home buyers need to be aware that lenders will look closely at their expenses and debts when determining their borrowing capacity, so they need to understand the impact of their debts. This means car loans, personal loans, credit cards and Afterpay.”
Consistent spending on dining out and ordering in may be a red flag on your statements. Picture: Kate Hunter
Conisbee recommends keeping track of your expenses and constraining them as much as possible. Start practising frugality and remove any unnecessary subscriptions or regular payments — paint the picture that you’re a saver.
“First home buyers are seen as relatively safe borrowers. They are often at the start of their careers and have a long time to pay off their loans. However, there is unlikely to be much change to responsible lending going forward,” she says.
4. It’s time to get in the game
According to Conisbee, it’s a buyer’s market so now may be the time to get your foot on the ladder.
“Prices have come back and fewer buyers means there is less competition for homes. Now is a good time to buy, particularly for first home buyers, however, there is no rush. Although prices appear to be stabilising, you do need to be mindful that they may fall further,” she says.
“That being said, conditions can change quite rapidly so rather than trying to pick the market, my advice is to buy your ideal home if you find it.”
5. But slow and steady wins the race
“At this stage, it looks like it will be a slow market,” says Conisbee. So, if you’re at liberty to, she recommends being a little picky and taking your time to find the right home.
6. You can play hardball
Since it’s a buyer’s market, you’re in a position to negotiate. Don’t be afraid to make an offer before auction, let a property get passed in or negotiate a better price.
Word of warning though, don’t lose a place you love for the sake of a small (in the long run) saving.
It’s a buyer’s market so you’re in a good position to negotiate when you find the right home. Picture: Tamara Graham
7. You can speed date for the right lender
There’s no denying that the Royal Commission changed public sentiment for the big banks, and since a home loan is a significant financial commitment, it’s important to feel positive about your lender.
“When looking at getting a loan, it pays to shop around as you can often get a better deal from a lender outside the big four,” says Conisbee.
If you’re a first home buyer, look for banks that provide products to incentivise first home buyers.
For example, Suncorp may allow owner-occupiers to use the equity in the home of a family member towards the purchase of their new home.
The extra bank guarantee from the property means you won’t need the full 20% cash deposit to avoid lender’s mortgage insurance.
Seeking assistance from a government rebates could propel your property dreams. Picture: Getty
8. Use the government’s money
Speaking of taking things free of charge, did you know that the government still offers incentives to first home buyers?
The incentives include concessions and waivers on stamp duty as well as a one-off grant to first home buyers that meet the eligibility criteria. The amount and requirements vary state-to-state but it’s definitely worth looking into.
Want more tips? Visit Suncorp’s Home Buying Guide.