Are you ready to be a homeowner? | The Area News

Sick of renting? You’re not alone.

In fact, many long-time renters in Australia are starting to feel a push towards home ownership, as rental vacancies reach a record low, and secure, attractive rental properties become harder to find.

And with interest rates set to drop over the rest of the year, now is a good time to start mapping out your first foray into the Australian property market as a serious buyer.

But just because the timing’s right with respect to the economy and market conditions, it doesn’t mean that the timing is guaranteed to be right for you.

So how do you know if you’re ready to be a homeowner?

We’ll be outlining some of the top qualities that you should expect to have under your belt before you begin your home buying journey.

If you’ve started to have a look at property listings, getting a clearer understanding of your spending limit, and have been jumping on Qantas Home Loans and other home loan providers to compare their rates, then you’ve already taken the first plunge into your transition from renter to prospective homeowner.

You’ve already started thinking about the financial requirements of securing a home loan.

As you may already know, a 20 per cent down payment is required for homeowners who are looking to attain a loan without having to pay for lender’s mortgage insurance (or ‘LMI’).

A deposit of anywhere between 5 per cent to under 20 per cent will require homeowners to pay the additional LMI fee to their home loan providers.

The cost of your LMI is largely determined by your overall borrowing amount, or the size of your loan.

As LMI only benefits the lender and not the borrower, it’s becoming common for many first home buyers to save up a 20 per cent deposit that allows them to forgo paying for LMI.

There is, however, another benefit to saving up a 20 per cent deposit rather than a 10 per cent deposit: the opportunity to make your loan a touch smaller, and to establish yourself as a stronger loan candidate.

If you are able to demonstrate a strong saving history, you’ll be more likely to be approved for a home loan with your preferred lender.

Speaking of securing approval for your loan, it’s a standard practice for loan providers to look at your credit history and banking statements in order to determine whether you are fiscally capable of taking on a home loan.

After all, managing a home loan can be very different to paying a set rental rate every month, so candidates with a proven ability to juggle multiple bills or monthly payments are more likely to curry the favour of lenders.

Having a look over your personal credit report can help you develop an understanding of what lenders may see when looking over your loan application.

If your credit rating is a touch on the lower side, you may have difficulties securing your ideal loan rate with your preferred lender.

Contrastingly, a higher credit rating demonstrates a level of financial stability and proficiency that lenders are looking for.

You can check your credit rating for free through Australian credit reporting agencies like Equifax.

Checking your credit rating before applying for loans can also help you identify any potential errors in your rating prior to approaching lenders.

Credit reporting agencies can also provide you with thorough reports for a small fee, or can even provide you with expert assistance with report corrections in the event that your report or credit rating may have an error.

Of course, it’s not enough to just pay your bills on time every month. You need a sufficient monthly income to support your loan repayments.

That’s why salary increases also improve your borrowing ability, and it’s also why lenders look at your employment history when assessing your creditworthiness.

Thankfully, having a stable income doesn’t equate to working in the same job for years and years. It’s common for young professionals to take on a mix of professional roles at the beginning of their careers, so lenders aren’t necessarily looking for loyalty.

They’re looking for evidence that you have a stable profession, not a stable role.

If you’ve moved from industry to industry, lenders may see you as less of a sure thing.

Contrastingly, if you’ve stayed within the same industry and maintained a similar job role with different employers, you will still be perceived as an applicant with stable income and employment prospects.

There are undeniably some great benefits to owning your own home, with housing security and the opportunity to grow your equity being just the tip of the iceberg. But what about the cons that accompany owning your own home?

Arguably, one of the biggest cons of home ownership is having to foot the bill for home maintenance jobs and emergency repairs.

During your years as a renter, sitting through home repairs was nothing but a minor hindrance or inconvenience.

But when it’s your home, and you’re also having to contend with monthly loan repayments on top of your basic household bills, the costs (and time investments) of home maintenance tasks become an even greater burden to bear.

If you’re comfortable climbing up to the roof of your rental property and clearing out the gutters in time for storm season, then this (and a slew of other home maintenance tasks) likely won’t come as a surprise for you once it’s time for you to become a homeowner yourself.

Finally, one of the most important aspects of buying your first home is making sure that you’re purchasing in the right location.

Whilst you can feasibly find a rental anywhere you’d like to in and around the inner city region, buying property in these areas is a more complicated process.

And sadly, as Australia’s capital cities continue expanding at a rapid rate, many first home buyers and growing families may find themselves being priced out of their preferred suburbs.

So are you willing to live in the sticks or at the very least, on the outskirts of your city, in order to grow your equity?

If not, then you could still purchase an inner city property like an apartment or a unit for a similar selling price that you could expect from a house on the outer edges of your metro region.

No matter which option you choose, it’s important to make sure that you can feel comfortable not just in your new home, but also settle into the new surroundings that accompany this transition into home ownership.

All things considered, buying your first property can often be said to be more a matter of timing instead of a question of preparedness.

You never know when you’re going to stumble onto a property listing that aligns perfectly with your budget and your household’s needs, so it pays to be ready as soon as possible.

Get your finances in order, attend any auctions that you can, and start to develop your home buying strategy now so that it’s ready to go as soon as you need it.