4 Things You Should Do Now To Buy A Home In The Not Too Distant Future
For Aussie millennials, owning property can feel like a bit of a pipe dream – especially if you happen to live in a capital city. After all, who can forget the smashed avo-on-toast saga of 2017? But contrary to what sensationalist headlines may lead us to believe, owning a home isn’t impossible. In fact, it might not even be as difficult as you’d think. If you make the right choices, it’s certainly a worthy investment into your future.
That said, you can’t just wake up one morning and decide you want to buy a property, like you might with a coffee or bagel. A certain amount of preparation (and money, obviously) is required to put down a deposit for a home. The more leg work you do before you start looking for your dream home or investment property, the better position you’ll be in to get approved for a loan.
Even if buying a property isn’t on the cards right now but you can see yourself doing it in the next five years, there are things you can do today to put you on the front foot. Here are four things you should do now to buy a home in the near distant future.
#1 Check your credit score
Your credit score plays a significant role in whether or not you’re approved for a home loan. This is essentially like a school report card, but contains the types of credit you use (ie, credit cards, phone bills, bank loans…) and how good you are at paying them back. Credit bureaus like Veda or Experian then take these details and calculate a score between zero and 1200.
“Emotion is a key part of buying a property so you need to make sure you know what you want so you don’t get FOMO and buy out of fear.”
Your credit score is one of the simplest ways lenders can determine your risk – so, obviously, you want to make sure yours is in good nick. If it isn’t up to scratch, it doesn’t necessarily mean you’ll be rejected, but it can mean you have fewer loan options or end up paying a higher interest rate.
There’s no hard and fast rule for what credit score you need to get approved for a loan. But to be safe, you want to shoot for “excellent” or “very good”. You can use websites like Credit Savvy or GetCreditScore to get your score instantly, as well as sign up for monthly email updates. You can find out more about improving your credit score here.
#2 Know what you want
We’re officially giving you orders to go window shopping for your dream property. Unfortunately, that doesn’t mean just pinning pictures of pretty homes to your Pinterest board or rocking up at the open houses at mansions so you can steal their food, like Jason Segel in I Love You Man.
Property prices will go up and down, but it’s important to have a ballpark figure in mind of how much you’re going to need for a deposit. Plus, having a clear idea in mind will help you make a decision with both your head and heart when the time comes to buy.
“Emotion is a key part of buying a property so you need to make sure you know what you want so you don’t get FOMO and buy out of fear,” says Andrew Clark, accountant and owner of Know Your Numbers Accounting. “Know what you want and keep saving until it comes your way.”
#3 Audit your finances
Yes, you’re going to need to save to put down a deposit for a home. But if you’re thinking about buying in the near distant future, there’s no reason you have to go into hermit mode and eat mi goreng for every meal.
If you’re consistent, making small sacrifices can add up a lot over the course of five years.
“Understand your expenses so you can trim the fat,” says Andrew Clark. “For example, if you’re spending $100 a week on buying your lunch, make your lunch and cut it back to $50 so you can pump more into savings.”
A saving of $50 a week equals a year saving of $2600 per year, which adds up to $13,000 over the course of five years. That’s a decent chunk to put towards your deposit. You could also try the 52 week challenge to save $1400 a year (or $7000 over five years).
#4 Get a pre-approval for a loan
What many people don’t realise is that you can actually get a pre-approval for a loan before you even start looking for a home. This is where your loan limit is approved for a certain amount of time (generally around six months), so it’s something worth doing once you get closer to actually buying.
“Once you’ve found the home you want to buy, you’ll be able to put an offer right away,” says Andrew Clark, It makes the process so much smoother if the bank has already said they’ll [lend] you the money.” It will also give you a better idea on how much you can spend on a deposit so you won’t waste your time looking at places you can’t afford.
You can also think about these four considerations for first homebuyers.
Emma Norris is a Sydney-based freelance writer and the owner of copywriting business, contentinthecity.com and lifestyle blog, agirlinprogress.com. When she’s not playing with words, she’s either doing pushups or stuffing her face with pizza. You can follow her on Instagram @emmajanenorris.