In 2018, you wouldn’t have been worrying about your Uber Eats budget. But this year, the lending environment for homebuyers has changed – and they need to adjust their spending behaviour accordingly.
Here are eight things to remember:
- Banks are choosy about who to lend to
Before the announcement of the Royal Commission in December 2017, it wasn’t required to scrutinise a prospective buyer’s spending. But now it is a requirement in the lending process.
What this means for homebuyers is that the process of securing a loan has become more difficult. But you still have a chance to get a loan approval if your saving is consistent and your debt is negligible.
- Uber Eats is a bad idea
You may feel like combing through your bank statements is a bit unnecessary, but this may be the practice at your lender when they are screening evaluating you for a home loan.
Now that lenders are looking more closely at an applicant’s financial situation since the Royal Commission, first home buyers need to thoroughly understand their financial circumstances and be able to show that they can meet the monthly repayments.
Experts suggest computing your estimated repayments prior to applying for a loan and saving that amount.
- Afterpay is also bad
If you thought putting all the purchases you made in the last three years on Afterpay or Zip Pay is a good idea, it’s not. Banks consider these as debt.
First home buyers should know that lenders will look at their spending debts in detail when evaluating their borrowing capacity, so they have to be aware of the effect of their debts. These include car loans, personal loans, credit cards and Afterpay.
What you can do is keep track of your spending and limiting them as much as possible. Start being frugal and get rid of any unnecessary subscriptions or regular payments.
Lenders see first home buyers as fairly safe borrowers. They are usually just starting with their careers and have years and years to pay off their loans. But we are unlikely to see a lot of changes in responsible lending in the near future.
- Time to enter the market
It is currently a buyer’s market so this is probably the perfect time to get in the game. Prices have returned and there are fewer buyers, which means the competition for buyers is not as strong as before.
- Slow and steady is the way to go
Based on current conditions, it is a slower market. So if you can afford it, you could be a little choosy and take some time in finding the perfect home.
- You can negotiate
You have the advantage in the negotiations process because it is a buyer’s market. Don’t hesitate to make an offer prior to auction, let a property go or bargain for a better price.
But keep in mind, don’t pass on a place you love just because of savings that will prove insignificant in the long run.
- Shop around for a lender
It is a fact that the Royal Commission shifted public opinion for the major banks, and because a home loan is a big financial obligation, it is essential to feel confident about your lender.
It pays to shop around when you are searching for a lender as this would allow you to secure a better deal outside of the four major banks.
Look for lenders that offer products with incentives for first home buyers.
- Take advantage of government money
The government offers incentives to first home buyers, so use it!
Included in the incentives are concessions and waivers on stamp duty along with a one-off grant to first home buyers that ticks off the eligibility requirement. The amount and criteria are different from state to state, but it will benefit you to look into it.