How you can own your own home within 12 months

With some determination, planning and a little expert help, you too can escape the rent trap and own your own piece of paradise

couple buying first home

With some determination, planning and a little expert help, you too can escape the rent trap and own your own piece of paradise

The great Australian dream of owning your own home can seem almost impossible to achieve these days. But behind the headlines about inflated housing prices and Gen Ys spending too much money on brunch and holidays lies a stark reality - day after day, ordinary people on regular incomes are waving goodbye to rental properties and unlocking the door to their first home.

How do they do it?

The answer is simple - they formulate a solid savings plan, access first home owner grants, and seek expert advice on what lenders are looking for when approving loans. Adopt this strategy and you could be finance-ready for a new home by this time next year.

While saving enough money for a home deposit can seem daunting, a well-devised long-term plan can make the seemingly impossible, possible.

Jennifer Crosbie is a senior broker at Aussie Home Loans and she says buyers are often surprised at how attainable their first home can be. An important first step is identifying which lender to target for finance - which bank suits your needs and will give you the best chance of approval?

“All lenders have different policies and not all customers fit those policies,” Jennifer says.

“Some people don’t realise that if they apply too many times with different banks that this can affect their credit rating. “

And where loans were until recently easy to secure, regulator crackdowns have seen banks get much tougher. Now, customers’ spending and savings situations are closely scrutinised  before a mortgage is offered.

“The bank will be assessing your income less your liabilities, your ability to make mortgage repayments and your current conduct paying debts,” Jennifer says.

Depending on how the loan is structured, the bank will ask for a variety of supporting documents, such as  bank statements, to ensure that your cost of living doesn’t affect your ability to make monthly mortgage repayments. A good independent broker can be invaluable in finding the right lender for you. They can also help buyers formulate a realistic savings plan.

“A broker can look at your current financial situation and discuss the areas you need to work on, like saving a larger deposit, paying off an existing debt such as a car loan, or working for longer in your current job before applying,” she says.

“Set a budget to save for the deposit you require and look at your living expenses and work out what you can do without to achieve your goal.”

Once you’ve made a detailed assessment of your weekly spending, you’ll see obvious ways you can reduce your expenses. This can include temporarily moving into a smaller home or further out of the city to reduce your rental costs; simplifying your grocery shop and cutting down on bought lunches, coffees and take-away; and reduce utility bills by shopping around for competitive rates.

That’s how Olga Levitt, 35, purchased her first home this year at The Meadows by Villa World in Strathpine, just 25km from the Brisbane CBD. Villa World often refers first home buyers looking to escape the rent trap to independent brokers who can help give them practical tools and advice to save and plan their budgets.

“The broker helped me come up with a plan to save for my deposit and she tried a few options with different banks for me. She broke it down so it seemed achievable,” says Olga, a sales c onsultant for The Meadows who can closely relate to the challenges her clients are facing. She moved into her brand new house, the Newstead, in July after paying off her student loan and saving for her deposit for three years.

“You do have to make sacrifices to save a certain amount. I was quite strict with my spending. I didn’t go out as much and the area where I really cut out my expenses was clothes shopping or buying things I didn’t necessarily need - eating out and going out was another big one.

“Saving became natural and it was a good feeling because it made me realise how much I need and don’t need. It was easier because I had that end goal in sight,” she says.

Once you’re on track to save that elusive deposit, you’ll need to complete an application for pre-approval.

“A pre-approval is where the bank has assessed the buyers’ financial situation and is happy to give finance depending on the property they want to purchase. If you have pre-approval when shopping around for your home this puts you in a stronger position to secure the property before other buyers,” she says.

A final no-brainer is the First Home Owner Grant, available for brand news homes. The size of the grant varies from state to state. Queensland offers $15,000, New South Wales offers $10,000 and Victoria offers $10,000 or $20,000 in regional towns. Other conditions including the purchase price and stamp duty concessions also vary in each state, as does whether you can use the grant for your deposit.

Originally published as How you can own your own home within 12 months