If you’ve been hearing reports that the housing market could be turning into a buyer’s market this year – before you call your local real estate agent and put in an offer – hold up.
Prices may be coming down, but lending restrictions and tighter regulations mean securing a home loan as a first home buyer is necessarily any easier.
So, if your goal is to finally own your own home in 2022, here are the three top things to consider.
The state of your bank account
New rules, introduced in December 2021, mean banks have been required to put your spending under the microscope. They were designed to protect vulnerable borrowers from ‘unaffordable debt’ but ended up affecting all borrowers. While the Government has now decided to soften some of the new rules (so the banks don’t have to scrutinise your spending at Kmart) the changes won’t take effect until June.
Regardless – it’s a good idea to make sure your bank statements show just how responsible you are with your cash, because the banks still need to know you can afford to pay your mortgage while still covering all your other living costs.
How much will need for a deposit?
Stricter Loan to Value Ratio (LVR) restrictions introduced in November last year also haven’t helped first home buyers. The restrictions mean banks are limited on how much lending they can approve with a high LVR. A high LVR is any loan that is more than 80% of the house’s value.
Your best bet is to aim for a 20% deposit – but, if that feels out of reach, don’t despair just yet. If you’re buying a new build, or a home ‘off-the-plans’ a 10% deposit will still get your foot in the door – albeit a few months down the track!
Where is that deposit coming from?
Whether you’re gunning for a 20% deposit, or hope the bank will approve your home loan with less, know where that money is coming from.
Banks prefer you to have a minimum of 5% of the purchase price as ‘genuine savings’ to contribute to your deposit. This can come from your KiwiSaver, or other savings you’ve accumulated. For the rest, check the lending criteria at the Bank of Mum and Dad, or see if you qualify for any first home grants.
Buying your first home should be exciting – but it can also be stressful!
If you’re after some advice on how to get there faster and make the experience as smooth as possible, book a consultation with one of our financial coaches. (A fee applies).
Disclaimer: This blog post is for informational purposes only and does not constitute individual financial advice. If you’re interested in receiving personalised financial advice, you can book in a consultation with an enable.me coach. Costs apply.