Managing finances to wield buying power

According to a report, more millennials are lining up to apply for home loans because of rising rentals in Australia. These millennials are the generation that has seen their parents and neighbours suffer the consequences of the global economic recession in the early 90s and understand the importance of financial security. Even though the Australian real estate market is one of the most unaffordable ones in the world, about 83% of millennials in a survey said they were planning to buy a house in the next five years. However, they have to overcome a few hurdles before applying for a home loan.

Experts have pointed out that young graduates are facing more debt on student loans than ever before and find it harder to save a deposit. Loans that took an average of eight years of repayment earlier, now take thirteen years. Understandably, banks are shying away from sanctioning home loans to people with a weak income-to-debt ratio. To qualify for a home loan now, it requires more planning and discipline in saving than ever before.

To buy a house while withstanding these challenges, experts offer the following practical suggestions:

1. Find ways to optimise financial resources

Even though this piece of advice may sound frivolous but experts say that the first step to improving saving is by revisiting your budget and check spending habits. If there is some level of discretionary expenditure that you cancurb, it will go a long way in accumulating the deposit for that dream home.

Also, even if it is a bit time-consuming, develop a habit of tracking your daily expenses in a diary or an app. You will be able to set monthly saving targets once you know where you can cut-down costs. To get a good idea about monthly goals that will work for you, try using borrowing power calculators available for free use online.

2. Watch your credit score

An excellent credit score is an impressive achievement that will work in your favour when you apply for a home loan. There are various ways to cultivate it. For example, do not sign up for a credit card just for reward points or discount programs because their quality has a direct impact on your score. You must ensure that your credit cards are being used prudently and repaid on time.

3. Be flexible about the location

Buying a house close to the place of work is a dream indeed. However, ask yourself this - will I be able to enjoy more financial freedom if I can buy a cheaper house that is slightly far away? The answer to this question varies from person to person, but if you can save for a rainy day while repaying your debts on time without worry, then you should consider buying your first house in a more affordable area.

4. Seek for help from others

Banks tend to be slightly more lenient in lending terms if there is a family member to guarantee your loan. If your parents or siblings are not in a position to support you, you can always look for government-backed housing schemes.