Maximising Your Borrowing Capacity and Honing Your Budget: Tips for First-Time Homebuyers

By Deltos Finance on October 30, 2023
first home buyer loans

Imagine going on a trek through uncharted territory, where every twist and turn holds new discoveries. That’s the world of homeownership for a first-timer. The thrill of finding the perfect house, paired with the challenge of deciphering mortgage jargon, can be a dynamic mix. Just as every explorer needs a reliable map, we’re here to provide that guidance. Today, we’ll unravel the essentials, from the nitty-gritty of applying for first-home buyer loans to using mortgage affordability calculators and exploring open houses in different areas. Here are some of our best tips for first-time homebuyers. 

Assess Your Finances and Set Your Budget for a House

Entering the path to homeownership demands more than just dreams; it requires a clear financial blueprint. So, before letting a property steal your heart, it’s crucial to assess your financial situation—consider your earnings, look at your savings account and evaluate your monthly spending power. Crunching those numbers can help you set a budget for a new house. Also, don’t forget to account for the upfront costs of purchasing a home, recurring expenses of maintaining a house and potential shifts in your financial horizon. With a well-defined budget, you can safeguard your financial health while taking a step closer to becoming a savvy first-time homebuyer.

Want to have an idea of how much you can borrow and afford? Use free mortgage affordability calculators to crunch the numbers and prepare better.

Leverage Government Support 

Need a little help securing your funds for your first home? Government assistance programs can be helpful for first-time homebuyers. Many jurisdictions offer financial support and incentives, such as first home owner grants or reduced stamp duty, to help make homeownership more accessible. These programs can significantly boost your purchasing power and ease the financial burden of buying your first home. Researching and aligning with these government programs in your region can be a game-changer.

Save Up for a Sizeable Down Payment

A generous deposit can be your best ally when stepping into real estate for the first time. Consistent saving efforts targeting an optimal home loan deposit can shrink your mortgage sum, possibly unlocking better interest rates and lighter monthly dues. It demands discipline, but the long-term outcome of homeownership may be well worth it.

Improve Your Credit Score and Financial Footprint

Your credit score holds paramount importance when applying for home loans. Lenders lean on it to gauge your credit reliability. A robust score opens doors to superior loan terms and attractive interest rates, while a low score may see you miss out on a loan altogether. Be proactive—regularly scrutinise your credit report, pay bills punctually, manage credit card balances and avoid new credit pursuits to bolster your financial profile.

Reduce credit card limits

When assessing your borrowing capacity, lenders aren’t interested in how much credit you’re utilising each month, they take into account the amount you’re approved to utilise. So, if you have a credit card limit of $15,000, but you only use $5,000 of it, the lender will use the full $15,000 when calculating your financial obligations. 

It might be worth lowering your credit card limits (or getting rid of credit cards altogether) if you’d like to boost your borrowing capacity). However, keep in mind that reducing your credit limit may negatively impact your credit score as your debt utilisation ratio will rise. For example, with a $15,000 limit and a $5,000 amount used, the utilisation ratio is 33%. If you reduce the limit to $5,000 and still utilise the full amount, the ratio is now 100% which can flag on your credit file that you’re reliance on credit has increased. 

Decode the Mortgage Maze

Navigating the mortgage market can be overwhelming for first-time buyers, especially with various loan options and lenders to choose from. Collaborating with a seasoned, reputable mortgage broker can demystify the journey and help you avoid common loan mistakes by first-home buyers. Acting as your advocate, they sift through numerous loan products, zeroing in on the optimal match for your financial situation while offering tailored counsel and streamlining paperwork.

tips for first time homebuyers

Have the Edge of Pre-Approval

Securing a mortgage pre-approval can be an edge when looking for your first home. Pre-approval shows sellers you’re a serious buyer and strengthens your negotiating position. With pre-approval in hand, you can confidently make offers on residential properties within your budget, making you a more attractive candidate to sellers. Be sure to work with mortgage brokers like us. Here at Deltos Finance, we take pride in having one of the highest loan approval rates across mortgage brokers in Australia.

Explore Open Houses

Attending open houses and asking questions are essential when you’re looking to buy a first home. It allows you to get a feel for different properties and neighbourhoods while getting valuable insights into the local real estate market—its average property value and whether it has the potential to grow in the coming years. So, take the time to explore open houses in various areas.

Remember That Home Inspection Is Non-Negotiable

Never sidestep a comprehensive home inspection. Enlisting a certified inspector can spotlight latent issues, empowering you with a transparent understanding of the property’s condition. This diligence shields you from unforeseen costs that can ruin your budget. You can also use the home inspection results to negotiate a better home price. 

Master the Art of Negotiation

Negotiation skills can play a significant role in securing a favourable deal. Work with your real estate agent to negotiate with sellers and include contingencies to protect your interests during the buying process. Skilful negotiation can translate to tangible savings and a superior home purchase deal that fits into your borrowing capacity. 

Scrutinise the Fine Print

Before any ink meets paper, digest every clause and condition. If complexities arise, enlist legal expertise to ensure your buyer rights remain uncompromised. Legal guidance can provide peace of mind and protect your interests as a first-home buyer.

Account for Closing Costs

Keep in mind that closing costs are crucial. These costs can include legal fees, appraisal fees and title insurance. Budgeting for closing costs will help you avoid any last-minute surprises and ensure a smooth and stress-free closing process. 

Keep a Pulse on Local Market Dynamics

Staying informed about local real estate market trends and interest rates is crucial, as they can impact your buying decision. By tracking these metrics, you position yourself to harness opportune moments and secure a favourable mortgage with the best possible terms. 

Ready to Amplify Your Borrowing Potential?

Are you ready to apply these real estate tips for first-time homebuyers and amplify your borrowing potential? We’re here to assist. Dive deeper, ask questions and let us guide you through each step, ensuring you secure the best possible footing in the world of real estate. Call us today and make your dream home a reality sooner than you think!

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