Purchasing property when the market is ‘hot’ is a challenge for anyone, but for first home buyers trying to enter the market for the first time, it can be extremely discouraging having offers continually knocked back – especially when they tick all the boxes needed to buy a property.
Although it’s easy to get disheartened, there are some ways around some of these challenges first home buyers face.
All too often, first home buyers will have a higher expectation of what they think they can borrow, rather than what is realistic. Inovayt Finance Broker, Justin Coughlin, says it’s all about managing those expectations.
“There’s no point in someone wanting to buy for a million dollars if they’re nowhere near that capacity – it’s just a matter of saying ‘okay that’s not possible but this is’ and managing their expectations.”
One of the most common challenges first home buyers face is not having enough money for their initial deposit or being able to borrow less than they thought based on their Loan Value Ratio (LVR).
“A young couple looking to buy their first home might tick all the boxes,” says Justin. “If they’re both working full time, they usually have good incomes and minimal other debts, meaning they tend to have a pretty good borrowing capacity. The key thing that’s almost always the issue is the deposit. Therefore, it’s a matter of navigating whether we use lender’s mortgage insurance (LMI), the first homeowner deposit scheme, or if we use a family guarantor to work around the deposit side of things.”
Once you know what options you have available to you, you’ll be able to reasonably match your expectations with the reality of what you can do.
Head to our blog to read more on Using a Guarantor to Purchase a Home.
Having a poor credit score
While having a lot of consumer debt isn’t common in young first home buyers, some may struggle with a poor credit score which has stopped them from getting into the market, or from being approved by certain lenders. If you do have a poor credit score, Justin advises a few things you can do.
“There are certain lenders who will happily accept a paid default on a credit file up to $500 – it’s just about finding the right bank,” he says. “Other issues, like repeat late payments, can cause difficulties in getting accepted by lenders. Your options here would be to delay your purchase until you’ve managed to rehabilitate your credit a little bit – get those late payments paid off as best you can.”
If you do wish to continue purchasing your first home, it’s important to be aware you may not be able to go with the lender you’d like, as you may need to borrow from someone who specialises in people with poor credit. If you choose to go down this route, rather than waiting until your credit score improves, be prepared to potentially pay a higher interest rate.
Head to our blog to read How a Lender Will Assess Your Loan Application.
Missing out by a lot or a little
Searching for your first property can be stressful and until you find the right place, you might experience some disappointment when putting in offers and getting knocked back.
Whether you’re missing out by small amounts or larger margins, each blow can feel disheartening. Unfortunately, unless you’re willing and able to offer more money, there’s not a lot you can do.
If you’re about to miss out by a small margin, you can consider trying to make your offer more appealing by offering a settlement period that appeals to the vendor or considering bypassing a building and pest inspection and making an unconditional offer. If this is the road you choose, make sure you speak with a professional before making any offers, as this may not be the best option for you.
Although it can be disappointing, it’s important to remember to be patient and not rush into something you might regret, like blowing your budget or neglecting a building inspection that might uncover underlying problems you’ll have to pay for in the long run.
Read our blog on Why First Home Buyers Must Budget for More Than a Mortgage
Negative dealings with real estate agents
Working with real estate agents can be different from anyone else you’ve had to deal with before. While many can help you out, it’s important to keep in mind that at the end of the day, they’re working primarily for the vendor to help get the best price possible for them.
If you have a negative experience dealing with a real estate agent, try not to be too disheartened. If you genuinely believe there have been unethical dealings, it’s okay to reach out to someone higher up in their organisation, or even consumer affairs.
Navigating your way through the world of real estate is often foreign territory for first home buyers, so it’s important to do your research to make sure you’re comfortable with and understand the process.
Using a buyer’s advocate
Some first home buyers may want to enlist the help of a buyer’s advocate to help them navigate the process.
“A buyer’s advocate can help work within your requirements and budget to try and find a property for you,” Justin says. “They can research on your behalf, as well as negotiate with the real estate agent during private sales and bid at an auction for you.”
If you do choose to use a buyer’s advocate, you must do your research first to understand the fees involved.
Entering the property market is a stressful time. As first home buyers, you are exposed to a lot of words and concepts you may not have heard before, as well as dealing with people like conveyancers, real estate agents and brokers to help you on your journey. If you’re looking to enter the property market and buy your first home, get in touch with our team today.