Many Australians grow up with the aim of owning their own home one day, and with interest rates at their lowest in 50 years, it may be a good time for financially-fit first home buyers to take the plunge.
For most of us, buying a property is probably the biggest financial commitment we will make in our lives, so it’s important to approach it wisely.
By doing your research and following a few guidelines, you’ll be able to turn the great Australian dream into a reality in 2014.
Be clear on what you can afford
It’s important to establish how much you can afford to pay, and what sort of property and location will suit you before entering the property market.
Consider your lifestyle and do your research on the types of properties available to you at your price level.
Visiting open homes, talking to real estate agents and viewing past sales results for the areas you are interested in are all great ways to get a handle on the market.
While this is your first home purchase, it is also important to keep in mind that it is an investment too – access to transport and amenities and lifestyle features will ensure that when you decide to upgrade, your property will be attractive to future buyers.
Read more: First home buyers – what to look for
Review your finances
Before approaching a lender for a home loan it’s a good idea to review your spending habits.
List your income and all expenses, including bills, groceries and entertainment on a budgeting spreadsheet or calculator – one such calculator is available atwww.moneysmart.gov.au
Make sure you factor in other upfront and ongoing costs involved in buying a property, such as stamp duty, conveyancing and legal fees, strata fees if purchasing a unit, and council rates.
Read more: Guide to stamp duty
Build up your savings account
Even though lenders no longer ask for a 20% deposit, it’s still a good idea to establish a regular savings habit. In fact, many lenders require a record of savings history as part of the criteria for applying for a home loan.
Work out what you can live without while you are saving for your first home. If possible, consider share houses or even moving back in with family to save on rent, and look at little ways to save such as cooking dinner at home rather than eating out.
Opening a high interest savings account or term deposit will help you grow your deposit faster as many institutions offer competitive rates. You may also want to consider a First Home Saver Account, which gives you concessional tax treatment on earnings, plus government contributions to help you save for your dream home.
Pay down debt & tidy your credit history
It is a good idea to pay down personal debt such as credit cards and store accounts as much as you can prior to buying a property. If you’ve had multiple credit cards over the years or made a few late payments on any bills, it may be beneficial to obtain a credit report to get an idea of where you stand.
Close all unnecessary accounts and ensure that any regular payments are up to date. Paying down your debts and minimising the number of accounts you have will not only allow you to borrow a little more, but also give you a bit of financial breathing space in your budget. This will be important when interest rates inevitably start to rise.