First Home Buyer Tips

3 tips for buying your first home this year ... 2024

Dustin Lindale

No doubt 2024 is set to be another interesting year for first home buyers seeking to get into their first home. Generally experts are predicting that house prices are set to rise in 2024. With interest rates predicted to fall, this provides an opportunity for first home buyers to get on the property ladder. Our suggestion for first home buyers is to work on areas that help them get closer to being ready for a home loan pre-approval.

So here are our 3 tips to help you get closer to your goal of owning your first home:

1. Reduce or get rid of your debts

There are many hurdles when it comes to helping first home buyers get themselves in a position where they are ready for a mortgage. However, debt is often one we see stopping first home buyers in their tracks. Luckily, with some focused efforts, this hurdle can be overcome.

The key thing to consider here is that for every $10,000 of debt, your home loan affordability is reduced by around $50,000. This is because any current debt payments - be it monthly credit card payments or personal loan payments - need to be included in your monthly expenses declared to the Bank. These expenses then lower your monthly surplus (income less expenses) which determines your home loan affordability.

For more information about how to reduce or get rid of your debts, take a look at this article covering 6 Tips For Getting On Top Of A Debt Mountain

2. Create a home ownership budget

With the implementation of CCCFA regulations in 2021, it has become imperative for individuals seeking bank loans to have a comprehensive understanding of their monthly expenses. These changes have posed significant challenges for first home buyers in obtaining a mortgage, as banks have become more cautious in their approval process. One notable consequence is the meticulous scrutiny of borrowers' bank statements to determine which monthly expenses should be included in a mortgage application. As a result, applications are often either rejected or approved for lower amounts.

Fortunately, in mid-2022, these regulations were amended based on feedback from the banks, aiming to make the rules more easily understood and applied. A significant development was that a client's previous three months of bank statements were no longer the sole determinant of monthly expenses. Banks and mortgage advisers could now engage in discussions with clients to identify regular and ongoing expenses, as well as expenses that would no longer apply once a client obtained a home loan. This allowed for the exclusion of discontinued subscriptions and reduced dining out expenses, among others.

During 2023, the banks became more flexible with their analysis of expenses. Provided you can provide feedback on what amendments to your current spending will change, within reason the banks will accept these changes.

Therefore, first home buyers need to effectively manage their expenses to enhance their chances of loan approval.

Our suggestions here would be to:

- create a homeownership budget using something like Sorted's Budget tool or Pocketsmith's budgeting app.

- Check out our blog article 7 Steps to creating a monthly budget.

- setup a system that you can stick to it (automatic payments, monthly review of bank statements).

- print out bank statements and review all current expenses for reductions (think unused subscriptions, dining out and other discretionary spending.)

3. Confirm your home loan affordability

An important step to being ready to apply for a home loan is getting an idea of your current affordability. That way you can work out a plan to get you from where you currently are to a stage where your home loan affordability can help you purchase your first home.