Buying your first home is an important stage in your life. In many cases, potential home buyers feel shut out of the home market. This does not have to be the case. Even with the low interest rates in the market that ultimately push home prices higher, there are a few tips that can help first home buyers. The following are the tips that will go a long way in helping first home buyers:-
Develop A Saving Culture
There is no better time to start saving than right now. If you want to buy your first home, you have no choice but to start saving. Lenders often require that you have at least 10 percent of the purchase price of your home as genuine savings. Moreover, you may be required to show a consistent track of savings for a particular period of time, usually six months. You should therefore set a goal of your desired savings amount and start saving regularly (preferably every week) in a high-interest savings account, separate from your current account or one that you use while meeting your everyday expenses. You can use direct crediting to deposit funds into your savings account. If you have a spouse, you can channel your salary or that of your spouse directly into the savings account.
Demonstrate That You Have A Stable Income Stream
Lenders need assurance that you will be able to repay your mortgage in due time. One way to assure them of this is of course to demonstrate that you have a stable income stream. Most lenders require employed borrowers to show at least 6 months of PAYG employment while they require the unemployed ones to present financials and tax returns of at least 2 years.
Cut On Your Debt
Lenders will look at the limit on your credit and store cards, and not your balance on these cards while determining whether or not to finance the purchase of your home. Therefore, you ought to eliminate or otherwise reduce the limits on your credit and store cards.
Make Use Of The First Home Owners Grant (FHOG)
The FHOG can really come in handy to first home buyers. It must however be for a new home construction and cannot be used to buy the land on which the home will be built. Moreover, lenders will not treat FHOG as part of your genuine savings. The logistics surrounding FHOG often differ from state to state. You should therefore do your homework well before settling for the option of using FHOG to finance the purchase of your home.
Don’t Limit Your Options On Lenders; Shop Around
There are various lenders out there offering mortgages to first home buyers. Why only consider what one is offering? You should not limit your options when it comes to deciding which lender will finance your first home. Mortgage rates vary from 4.6 to 6 percent. The 1.4 percent difference might appear small but is often significant in absolute terms. For a $350,000 mortgage over 30 years for example, the 1.4% is worth over $300 per month.
Watch Out For Misleading Marketing Gimmicks By Lenders
Lenders often make marketing offers such as ‘discount’ mortgages and other low offers. Lenders usually apply these low rates for a year or two before reverting back to applying higher rates. You should instead rely more on the ‘comparison rate’.
Be Wary Of Fixed-Rate Loans And Instead Opt for Variable-Rate Loans
Most of us are brought up in a culture of budgeting for the future. It is therefore understandable that many first home buyers prefer fixed-rate loans as it spells certainty. With fixed loans however, your flexibility is extremely curtailed and you may incur break costs should you opt to sell or refinance the loan. With variable rate loans on the other hand, you have more flexibility as you can repay higher amounts or deposit lump sums such as those from tax refunds and bonuses to speed up your repayment. Moreover, you can easily refinance a variable-rate loan without facing penalties. The downside of variable rate loans is that you may be forced to repay more should the prevailing market rates increase.
Use A Mortgage Offset Account
The amount in your mortgage offset account reduces the outstanding mortgage amount each passing day. This way, interest is computed on a lower amount thus reducing your interest expenses. You should therefore aim to channel all your income into a mortgage offset account.
Seek Advice Of Mortgage Brokers
There are various great mortgage brokers out there who offer great insight and strategies to first home buyers. They are definitely worth speaking to.
Don’t Be Discouraged By The High Price Of Your Dream Home
There are several homes out there that will definitely appeal to you. You should not be discouraged if you cannot buy the home you want. There are many way you can invest and save to get you your dream home. You just need to get the right advice.
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