Preparing to buy your first home?

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1 Preparing to buy your first home? Buying your first home is an exciting journey! However, when you re at the beginning of your home buyers journey, you may be confused about to where to start and worried about whether you can borrow the money you need to buy the home of your dreams. You may be sick of paying rent, tired of saving every single dollar for your deposit, and well aware that home prices keep escalating. All these factors contribute to making the purchase of your first home challenging! Well, I have good news for you! It s likely that I can help you work through these challenges, and lead you through what should be an exciting time for you.

2 As a Mortgage Broker, nothing gives me greater satisfaction than seeing one of my customers placing the sold sticker on their first home. This is a common story. A young couple is told by their landlord that they need to move out of the unit they have been renting for some time. They now need to find another rental property, attend numerous open home inspections, and keep their fingers crossed that their application will be accepted, signing a 6 or12-month lease. For first home buyers, the thought that every move they make is only temporary can push them in the direction of purchasing a home of their own. A home of their own would give them the security of knowing that the potential of life living as a gypsy will end. After all, why pay off somebody else s home loan when you could be paying off a home of your own. Often when I meet people who are considering purchasing their first home, they are confused, and have questions about how to buy, how much they can borrow, and whether they will get approved. Three very stressful thoughts indeed. Well, I m happy to tell you that there is rarely a situation where I meet with a young couple and they cannot begin to take steps towards securing their dream home. My promise to you is this; if you follow the steps in this guide, you will buy your first home whether it be tomorrow, in three months, or sometime in the future. I promise to point you in the right direction. My name is Michael and I am a Mortgage Broker who specialises in working with first home buyers. My work gives me a great sense of satisfaction, especially when I can help my clients get the result they never thought possible. There is no doubt that one of the greatest smiles you will ever see is that of a first home buyer who not only gets their loan approved, but successfully purchases the home of their dreams.

3 Step one is to ignore the media and the focus on how out of reach purchasing a home is for the typical first home buyer. The media will not write a story that might begin with a headline first home ownership is well within the reach of young couples. It won t sell! The media sells content based on shock-value; death, murder, tragedy and loss. When you hear or read a headline that states homes are beyond the reach of first home buyers, this will create a shock-value. My advice to you is - ignore it!! Focus on the facts. More than 66,000 home buyers enter the property market each year in Australia. If you stay committed to believe in your own dream, you may become one of the 66,000 people who will buy their first home this year! Wouldn t that be great! Step two is understand that it is challenging to get to the next level in life without the help of somebody else. I frequently speak with the parents and grandparents of Gen-Y first home buyers, and they are more than willing to help their children get a roof over their head. As first home buyers way back when, they faced their own challenges, experienced countless stages where their home loan interest rate was well over 15%, and understand how important homeownership is. This, however, does not discount how tough it can be for you to save for a deposit; it is certainly a challenge. Does it seem like the more you save, the more housing prices rise? Well I have a solution for you, so stay with me.

4 I find that most parents are keen to assist their children in buying their first home, provided they are in a position to do so, and there is minimal risk involved. Aside from valuable advice, your parents or another family member may be willing to gift a sum of money to contribute towards your deposit. Another way they could help, which remains a lesser known option, is to offer their own home as additional security. This is known as a parental or family guarantee. A family guarantee means that the guarantor parents or another family member - offers their home or investment property as a form of deposit. In some cases, this can mean you can buy a home even if you do not have a significant deposit. In simple terms, Mum and Dad, or the family member, is required to register a mortgage against the title of their home. Their name will not be on the loan, and you will remain responsible for the home loan and the repayments. On the flipside you might be thinking... I want to do this on my own and don t want to rely on someone else. That is a great place to be, and I can certainly understand the value of being independent. Once you consider the minimal impact versus the massive savings that a family guarantee can give you, you may see this as a viable option to accelerate the purchase of your first home. It is important you never enter into a loan contract if you re not completely comfortable, or you don t fully understand. This is the loan contract for your home, and you are responsible to the bank for the borrowings. To reduce the risk even further, there is the opportunity to purchase first home buyers loan protection. This is a special type of insurance cover that will protect you and the family guarantee should circumstances occur that prevent you from making repayments. Step three is when you apply for your home loan, you should consider multiple structures. If you are proceeding with a family guarantee, you would have one portion of the loan relating to your property, and a second portion

5 relating to your parents or family members property (family guarantee component). With interest rates at historic lows, we can often accelerate the time it takes to pay off the family guarantee portion. This will essentially hand back to Mum dad or family member the title of their home much sooner. Now you may be thinking okay, this sounds great but how do I approach Mum and dad, or the family member? The answer is simple. Say something like this: Would you be prepared to help me by my first home without having to give me any money? I m sure that eyebrows will raise when this question is asked, and they will likely respond with a question back, for example how can I do that? A question starts a conversation, allowing you to explain a little more about how a family guarantee works. As a Mortgage Broker, I often meet with first home buyer parents and family members to explain the family guarantee process in detail. We discuss the risks involved, and the solutions to circumvent them. I will also articulate the great advantages for you to save money, allowing you to enter the property market sooner rather than later. Step four is get a preapproval. And this can be quite easy! A preapproved loan is not a formally approved loan. When you apply for a pre-approval, the bank will look at your income and your expenses, and decide whether you can afford the loan amount and its repayments. They will also consider the amount you have saved and can contribute to the purchase versus the amount you re requesting the bank to lend to you.

6 This is where I get involved. My role as a Mortgage Broker is to help you look your financial best in the banks eyes. I will act as your strongest advocate. I will present your story to the bank, demonstrating your income, savings history, finances, along with your goals and dreams, and explain to the bank why they should lend you the money. Having a pre-approved loan in place will give you confidence about how much you can borrow, the lending limitations, and how much you can spend on a purchase. Essentially, a pre-approved loan means that the bank is happy to lend you the money, provided the property you would like to purchase suits them, as well. When you apply for a pre-approval, it s important to discuss the type of property you re thinking of purchasing with the bank or lender. This will avoid ending up in a situation where your loan has been declined because the bank didn t like the fact that your unit is in a 10 storey block of apartments. Having said that, there are multiple lenders available who specialise in lending against such properties. Step number five is become a property expert in the local area you are looking to buy. It s so important you do your homework on the area as this will impact your future decisions. To become a confident first home buyer, It s a great idea to arm yourself with as much information as possible. At the end of doing your research, you should be able to walk into a property and know how much you think it s worth, and how much you are willing to pay for it. It s a worthwhile point to note that a real estate agent is generally paid a commission % based on the property sold price. So, it is in the real estate agent s best interests, and their client s best interests, to extract the most amount of money from you. When I work with my first home buyer clients, I teach them how to be confident when dealing with real estate agents, empowering them to get the right property at the right price. If you require assistance to arm yourself with the right information regarding comparative sales of properties in similar areas, I am more than happy to help.

7 I can send you a property report that will cover the location, the type of home that you are looking for, and also the exact home you have your eyes on. In fact, at no cost I will send you a five-page report on any property that you are considering buying. The report will include helpful information such as the estimated property value, the last sale price, and other comparable all property sales. As a Mortgage Broker, you can ring me as often as you want, and ask as many questions as you have. This is the case with most of my first home buyer clients, often with questions around how do we make an offer?, what if I buy something over our limit?, or how do I find somebody to help me with the legal aspects of settlement?. Unlike a bank, I take calls on Saturdays and Sundays. In fact, at all times, as I believe if I m going to tell you that I will help you, I should make myself available at a time that is convenient for you. Remember, it can take some time to find the right property. At times, you can make an offer that is accepted, and then rejected as a consequence of a higher offer coming in at a later stage. This process can be overwhelming, so it may be worth resting the idea for a couple of weeks. With persistence, you will find the perfect opportunity to create a life in your very own property. Step number six is remember to enjoy the journey as a first home buyer. This is an exciting time, and a great achievement. You ll find along the way that some people want to steal your dreams, even accidentally. Aligning yourself with a like-minded mortgage Broker like me will ensure you become a property expert in no time, guiding you through every step of your home loan journey. I want to share in your dream, and provide you with the encouragement and enthusiasm to pursue it. My name is Michael Rodda and I am a first home buyer specialist. Let me help you turn your property dream into a reality. Reach out by calling me on or send me an to michael@nextdoorhomeloans.com.au.