To first-time homebuyers facing financial issues such as housing affordability and bad credit, what other viable options are available?

Are you in the process of purchasing your very first home and feeling overwhelmed with rising housing prices, financial constraints, changing market conditions and poor credit? You’re not alone. As a first-time homebuyer, taking on such a huge responsibility can be intimidating. But even if it seems like an overwhelming task to buy a house, you can successfully make it happen by understanding your options and preparing for what lies ahead. In this article, we will share insider tips from experts to help guide aspiring first-time homeowners on their paths toward achieving their dream of owning property.

A recent report reveals that the cost of housing is still proving to be difficult for first-time homebuyers, with only 57% believing now is a suitable time to purchase property compared to 67% from just one year ago. As pathways into traditional homeownership become more and more challenging, many FHBs are considering alternate strategies.

The Helia’s First Home Buyer Report 2022 unveils that the majority of aspiring homeowners (68%) are challenged by housing affordability and accumulating a deposit. In response to this, nearly half are cutting back on lifestyle expenses (48%), while 45% anticipate prices decreasing so they can eventually purchase property.

Helia, formerly known as Genworth, is an Australian provider of Lender’s Mortgage Insurance (LMI). Shockingly, their report reveals a drastic decrease in those who wish to purchase with the mandatory 20 percent deposit required to avoid paying for LMI; this figure has plummeted from 41% in 2019 down to only 24%. Furthermore, usage of LMI has doubled over the same period – skyrocketing from 36% up to 71%. poor credit 

Even the Bank of Mum and Dad is feeling considerable pressure. According to a report published by Helia, 62% of first home buyers (FHBs) who purchased in the last two years have gained monetary assistance from their parents or family members – an increase compared to 57% in the previous year. However, this figure has been reduced for prospective FHBs planning on purchasing within 24 months – only 43%. This could be telling us that those with financially capable parental units are already being given support while those without are struggling behind. poor credit 

According to Helia CEO, Pauline Blight Johnston, housing affordability is out of reach for many Australians due to rising interest rates and inflation. She went on to suggest that “more pathways are needed in order to serve this crucial segment of the population.”

“Our report also shows we are starting to see the market for FHBs diverge into two distinct groups; higher- earning Australians who may have family support consider falling prices as a buying opportunity, and younger FHBs in regional areas or without family backing, feel at risk of being left behind unless further support is available.”

So, if traditional home ownership is off the table for now, what’s a first home buyer to do? Alternative options are available, but not all FHBs are familiar with them.

According to the Helia report, fewer recent FHBs have taken advantage of alternative pathways to home ownership than anticipated. Only 11 percent of first-home buyers used the First Home Super Saver Scheme while 8 and 6 percent turned towards rent-vesting and shared equity schemes respectively.

For first-time homebuyers that have yet to purchase and learn about the options available, an overwhelming 74% said they would consider taking out a deposit gap loan. Additionally, 63 percent stated their interest in employing the First Home Super Saver Scheme. When those unaware of these strategies were presented with them, a still impressive majority of 63%, agreed to considering it for themselves while 55% expressed enthusiasm toward rent-to-own services. poor credit 

First home buyers can benefit immensely from several support options and homeownership strategies such as:

  • First Home Owner Grants (FHOGs)
  • First Home Guarantee Scheme (Formerly the First Home Loan Deposit Scheme)
  • Waived or discounted stamp duty (which could be replaced with land tax in some situations)
  • Buying off the plan
  • Building a new home from scratch

If you’re not sure of the best strategy to buy your first home, consider contacting a mortgage broker for help assessing which options may best suit your unique financial situation. poor credit

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