7 Things First Home Buyers should think about
For a lot of First Home Buyers, getting into their own home is a big job with lots to understand, consider and get done. It can be tricky to figure out where to start, so with this in mind I thought I would compile a small list of things to consider in the process of getting ready to buy your first home.
A lot of this you will be able to do on your own and make a good start on, other parts of it you may need some outside help with. But the key takeaway from this is to make a plan and start now…
Think long term - I’m seeing a lot of FHBs that have a good outlook on buying a home and the market at the moment. Many have a view that if they can get a good deal on a property that ticks all the boxes, the savings on the purchase price can outweigh the costs of borrowing in a lot of cases. Ask anyone that works closely within the real estate industry and they’ll tell you, right now, it’s a buyers market. Those with a really good handle on the whole picture will tell you it’s a First Home Buyers market. This is the real truth of it and I go into a bit more detail on why I currently have this view in my previous blog which you can find here if you haven’t already had a read of it.
Get your house in order - Got a few debts you’re chipping away at hoping to pay off before you take on a mortgage? Maybe you feel like your spending has blown out and that any lender is going to hammer you for it? Or maybe you’re worried about that Credit Card or Store Card debt that doesn’t seem to be going anywhere no matter how hard you try. Get in touch with your Mortgage Advisor and get a plan together on the best way to tackle these. I have this convo with people all the time, and the advice always varies from client to client but often the strategy they have in place to repay debts and the strategy they could have are vastly different. It’s often as simple as a couple of small changes being made and talking about the strategy with someone in the know that can make a huge difference.
Look at your income - Take a good look at your income and the way you earn it. Could you be doing more hours at work to earn a bit more? If you can pick up that Saturday morning shift or start an hour earlier each day, it can have a real healthy impact on your financial position and the amount you can borrow. Has it been a while since you had a pay rise from the boss? Maybe you could have a chat with them, explain that you want to look at buying a house and ask if there’s a possibility of a pay rise or extra hours to help out. This, for many may feel really daunting, but there’s that old saying “if you don’t ask, you’ll never know” and you’d be surprised how many employers want to help out good staff members when they reach this point in life. If they can’t help now, ask what you can do to to improve your income from them in the future. Another thing to consider is if you can get a flat mate or two that would come and live with you which will provide extra money to help with expenses. Some people might cringe at the thought of having to live with others but if it means you can get into a home of your own sooner it may be worth it. Short term pain for a long term gain.
Explore every option for your deposit - Believe it or not, having enough deposit is less of a roadblock for many FHBs than you might think. With as little as a 5% deposit, it’s possible to purchase a property to live in. That means right now it’s possible to buy a first home for $700,000 with just a $35,000 deposit through the Kainga Ora First Home Loan, provided you meet both the banks lending criteria and Kainga Oras criteria also. You can find out more about this here or get in touch with me to chat it over anytime. If the First Home Loan isn’t going to be a help then it’s time to look at your Kiwisaver balances, cash savings, assets that you could sell or talk to family about the possibility of some help with increasing your deposit. There’s many ways to bring your deposit up to a usable level and it looks likely that the major banks will be able to lend more money to high LVR clients from next month. It’s a really good time to assess your deposit options and see where you sit. Again, have a chat to your advisor about possible options to maximise your deposit.
Do you really need those Buy Now, Pay Later facilities? - Yes, I know, they’re just so convenient and easy to use. And there are many people who use these facilities well to their advantage. But the cold hard facts are that they can absolutely hammer your ability to lend when it comes to assessment for a mortgage. Take a look at what you’ve spent over the last few months and work out your monthly average, because this is what the lenders will do and they’ll likely treat that average as a regular expense which can limit your lending options significantly. You’ll probably be surprised how much you’re spending on these and will also be surprised to find that the average amount that some of my clients spend each month using these facilities is often more than what we have to show as being left over each month when measuring the affordability of a lend. By repaying and closing these facilities early enough on, you can make the most of your real lending affordability and it could be the difference between being able to buy a house now or having to wait until later.
Get in touch with a Mortgage Advisor - Many Advisors are more than happy to look at your situation and take the time to help you get into a position where you’re ready to apply for a mortgage. To make things even better, our services usually don’t cost you anything and if it is going to be a cost to you, we’ll disclose this up front very early on. It’s quite common as an Advisor to work with some clients for months and sometimes even longer to help them get an approval in place and a settlement on a property purchase completed. Speaking from experience, it’s a really rewarding journey when you can help someone from start to finish and bring them the most value you can in the process. I tell people all the time that I wish someone had’ve pushed me to get in touch with a Mortgage Advisor when I bought my first home (or a Broker as they were referred to back then). It could’ve saved me soo many headaches and helped me to understand and streamline the process a lot had I got an Advisor to help me through it.
Build yourself a network list - Start asking around with friends and family members who have purchased a property in the last year or so and ask them about their experience. Talk to them about what professionals they worked with to get the purchase done and get a gauge for how likely they would be to recommend you to work with those people too. You can also ask these professionals who they recommend as well, for example I work with some really good people that can help my clients from start to finish and see it as another value add if I can point someone in a direction where I know they will be looked after. By doing this homework early on, you’ll be well prepared when it comes time to find an advisor, a purchasing agent, a solicitor or any other professional that you may need. Most importantly, you’ll have an idea of who you want to put your trust in and help you through what will likely be one of the biggest milestones of your life.
By reading this far through this blog, you’ve already started on your way to being better prepared for your journey to home ownership. Although none of what I talk about here is personalised financial advice, I’m always happy to have a chat about your individual situation and work with you to give the best advice and guidance I can.
Feel free to give me a call, email or message with any questions you have and keep an eye on my social media accounts for any updates and articles that might bring you some value. Also let me know if there’s a topic you’d like to see an article on as well.
Thanks
Matt