So what are the key factors that First Time Buyers need to consider when looking at purchasing their first home?
- Deposit – lending above 90% is pretty non-existent in the current climate so you will need a desposit of at least 10% of the purchase price with the better deals coming at the 85% loan to value level (15% deposit). Save, save, save or if at all possible borrow some money from the family.
- Credit Score – It is important to ensure that you are on the voter’s role and despite what Mum and Dad may say get a credit card! This is not to run up a huge debt, but used occasionally and responsibly it can actually boost your credit rating by demonstrating that you have the ability to manage credit. The chicken and egg problem being that first time buyers do not generally get great credit scores as these are biased towards home owners and people who have been paying down mortgages.
- Income Multiple – Gone are the days of 3.5 X joint or 3 X the first + the 2nd income. All sophisticated lenders use “affordability” calculators to assess not only a mortgage applicant’s income but also their ability to take on a mortgage debt that is affordable.
These are just little hints as the best advice for any would be first time buyer is get independent, whole-of-market advice from a professional mortgage broker. Someone like me.
Andrew Fowler worked for Limetree Financial Services until December 2010. Feel free to contact another member of our team for help or advice.