Top Tips For First Home Buyers Looking To Enter The Market In 2024
There is arguably no more exciting purchase than buying your first home. But even with all the excitement and cause for celebration, there’s also no denying that entering the property market for the first time can also be nerve-wracking, especially in times of questionable supply along with rising prices and rates.
So how can new investors or buyers looking to be owner-occupiers prepare to enter the property market in 2024? We’ll be answering just that question today by sharing our top actionable tips to help you prepare for anything your local property market throws at you in the new year.
Start Saving Now
If you haven’t started putting together your home deposit, then now is the perfect time to start (or the second most perfect time to start after twenty years ago!). Finding a home loan that’s favourable to your real estate aspirations means building up your cash reserves for a healthy deposit.
With that, the first thing you’ll want to do is implement healthy savings habits now. Set up automatic transfers from each paycheck into an account bearing interest. And keep in mind that saving is a discipline. It’s tricky, but it’s well worth it in the long term, and especially if you can sustain your healthy savings habits. If you ever feel yourself dipping in motivation, just think about how much you could build up by June or July 2024 if you stick with it now.
You should also start gathering essential documents, including pay stubs and bank and credit account statements, and organising these financial records into folder systems for potential lenders to review. If you’re looking to shop around for a mortgage broker, you’ll naturally find yourself having to fill out the same types of paperwork multiple times, so it’s good to have all those financial records readily available for the next form.
Understand Your Target Market
Alongside preparing your finances, another vital preliminary step you should take is getting started with your market research. This means looking into your local market trends, familiarising yourself with suburb demographics, and staying abreast of recent sales and current property prices in your desired location. This preliminary research will be invaluable in helping you identify the areas you’d like to buy into.
Now is also a good time to consider which surrounding areas you may be happy to invest in just in case you may not be able to find any suitable investment opportunities in your ideal suburbs. The difference in a few extra commute miles may be worth saving thousands off the purchase price. Plus, you may find some gems lurking within those remote yet up-and-coming development areas.
Credit Considerations
If you’re serious about that home, you’ll need to shore up your credit rating. Pull a free copy of your score from one of the main credit bureaus (i.e. Experian, Equifax, or Transunion). Once you know what your credit score is, you can start taking measures to get it to a higher figure. It’s recommended that first home buyers work towards improving their credit score to a rating of at least 680.
Alongside knowing your credit rating, it’s also well worth checking your credit report for any errors and problems that have long since been resolved (but may still be impacting your credit score). Often, it would help if you worked with a credit counsellor representing you to the bureaus. This process takes time, so be sure to get the ball rolling now.
In the meantime, try to pay your accounts on time and reduce outstanding balances as best you can. Lenders consider high credit utilisation rates a negative when evaluating borrowers seeking a mortgage. For example, say you have a card with a $5,000 limit, and you’re carrying over a balance of $4,000; your utilisation rate is 80%. Ideally, you’d prefer to reduce this percentage to below 30% to improve your credit rating.
Other ways to improve your rating are to avoid big purchases (holidays) and avoid opening or closing new credit accounts until you’ve been approved for your home loan. For those with limited history, the easiest way to begin building it is to become an authorised user on a family member or trusted friend’s account, assuming they already have a solid rating foundation. Additionally, some lenders offer small credit-building loans as a means to develop new customers.
Use Your Time Wisely
Knowledge is power, especially in the real estate game. So you should learn about the various processes you’ll go through as you purchase a home well in advance, just so there are no surprises down the line. Don’t just sit idle over the first quarter of 2024, waiting out these unfavourable market conditions. While you have the time, transform yourself into a formidable investor ready to tackle this process head-on.
For example, you’ll need to learn how to visually inspect the homes you’re interested in as you tour homes on the market. Things to focus on are the structural foundations, the condition of plumbing and electrical systems, plus the roof. Learn about red flags to look for. Mould, cracks, water damage, holes in the drywall.
Later, you will hire a professional home inspector; get a handle on that process now by asking friends, family, and colleagues for solid referrals. The same goes for appraisals. You are responsible for getting an accurate accounting of the home’s market value. Shop around for qualified professionals who can help you negotiate with sellers on matters of needed repairs and fair adjustments to the asking price based on the home’s condition.
Understand The Closing Process
The final stages of your purchase are critical. Learn the details and timeline of what occurs between accepting an offer and signing the final documents. There will be considerable paperwork and legal formalities. You’ll work with an attorney, your real estate agent, a lender representative, an insurance broker, and a home inspector.
Important documents to be aware of include the sales contract, mortgage forms, tax and insurance forms, and disclosures relating to the condition of the home for sale. Use this downtime to understand what takes place and begin building your team of representatives.
Build a personal support network including senior family members, and network with other first-time buyers in your locale. Together with your real estate agent, financial advisor, and attorney, you are assured a smooth transition from the closing into your first home ownership.
