One of the biggest fears of first home buyers everywhere, is that they may never get on to the property ladder at all. This is a real social stigma in Australia where 70% of people own, or are buying their own homes.
The Federal Government’s ‘First Home Owner’ grant that was increased in October 2008 has encouraged a flood of calls to mortgage brokers. Young hopefuls are looking to take advantage of the grant to make that first big step toward a place of their own. Unfortunately the grant ends on June 30th 2009 although mortgage brokers are lobbying for a six-month extension of the grant. There was very little interest in first home buying through 2008 until the grant went up. So it was just the reassurance and encouragement that first home buyers needed to overcome their reticence.
A second equally large fear for first home buyers is the fear of failure. The fear of making a big financial mistake that could end up in bankruptcy and foreclosure. Clare McGrath a 28-year-old laboratory manager put it this way. “Dave and me have wanted a place of our own for years now and have been saving towards it. But how safe were our jobs and what could we afford? How far should we stretch our budget to get a home we would love? The mortgage market can be very confusing and frightening to first home buyers who will probably only buy 2 or perhaps 3 houses in their lives.
Clare again explains. “We did well in finding a mortgage broker who understood our situation and took us through a very complete and interesting financial health check. He helped us look at our incomes and expenses. He gave us good estimates of our mortgage repayments based on our ability to service a home loan. He took into account all of our assets and liabilities and our precious deposit. We had never realized before how much our mortgage depended on so many things”
35% is the magic figure that should reassure first home buyers and give them the best guide to what they can afford with minimal risk of getting into trouble of the foreclosure kind. No first time buyer should take on repayments that are more than 35% of their weekly pre tax income. All responsible mortgage brokers will advise their clients in this way and will use sophisticated mortgage calculator software to judge first home buyer affordability.
To get a first home mortgage loan you must own more than you owe. Lenders will look carefully at your existing assets and liabilities. Assets including things such as furniture, vehicles, savings and investments you may have accumulated over the years. Lenders will look at your credit record to determine whether you are likely to default on the repayments. Factors such as your occupation, work record, where you live and your record as a tenant, are used to build a credit profile. Your credit risk can influence how much you can borrow.
A third fear for first home buyers is getting the timing right for their entry into the market. Many first home buyers held back in the first three quarters of 2008 out of uncertainty and fear that house prices would continue to fall. The First Home Owner grant is definitely reversing that trend. In contrast to this many first home buyers are afraid not to jump in and buy as soon as they are in a position to do so because house price inflation is relentlessly moving affordable homes out of their financial reach. In reality there is some truth and a lot of rubbish talked about house prices generally. The only way for first home buyers to overcome their fears is to get expert advice in the way Clare and Dave did.
