Despite the media regularly predicting dire outcomes for first time home buyers in the face of rising house prices, at least 80,000 singles or couples every year buy their first property. With the average first home buyer loan sitting at around $300,000, they are certainly not purchasing premium real estate. However, they are proving that with reasonable expectations and a realistic deposit, they are still a vital part of the market.
Budgets Not Magic but They Get the Job Done
Our agency, Bunbury Real Estate, is a favoured resource for first home buyers in our area because of our knowledge of local property values. They also appreciate that we are prepared to spend time with them, listening to their property aspirations and answering their questions. It is no surprise that the issue we are most often asked about is saving for a deposit. The answer we give them is not a magic solution but it is a predictable one. We talk about budgets.
Lenders Like to See Savings Patterns
In our experience, lenders tend to look favourably on loan applicants with sound employment prospects, regular savings patterns and healthy deposits of at least 10%. To save that amount of money is not easy when you consider that around 70% of first home buyers are in rental situations where a significant portion of their income is already committed.
We suggest that if they do not already have a strategy for creating regular savings patterns, they need to be serious about establishing a budget. If it is realistic and they stick to it, in the timeframe they have set they will have met two of these three requirements. They will have a deposit and evidence in their bank statements of regular savings.
Small Savings Build Quickly Over Time
We suggest they record all their expenditure for a couple of weeks to see where they can make cuts in spending. In this exercise, expenditure includes food, fares, entertainment, clothing and small, unnoticed items like buying a magazine to read on the bus. A good example of how small savings can build is the morning coffee many people buy on their way to work. $5 a working day for one coffee is $25 a week, $100 a month and $1200 a year.
Budgeting goals that coincide with the length of each individual’s pay cycle are easier to maintain. This concentrates the savings effort on the short term, allowing any necessary cash flow adjustments to be made without jeopardising the overall long-term goal. As the savings total begins to build, so does the incentive to find additional lifestyle money-wasters.
Be Creative When Looking for Savings
We have had clients come back to us with their deposit saved, ready to buy, and thanking us for suggesting things like shopping around for a better internet service or mobile phone plan, choosing DVD nights at home instead of a movie or inviting friends to a barbeque in a park in lieu of a restaurant meal. It just takes a little imagination.
At Bunbury Real Estate we like nothing better than to see our first home buyers move into their dream home or apartment. Sometimes all it takes is something as simple as a few budget tips to get them started.