How to prepare to buy a home while you save a deposit

Buying a home is a significant undertaking, especially when you're simultaneously saving for a deposit. Mortgage broker Craig Morgan advises that being a first-time buyer can be beneficial, as you're likely more aware of the unknowns and willing to learn. It's crucial to gain knowledge and prepare during your savings journey. Morgan recommends consulting a mortgage broker to understand your borrowing capacity, which can be done using online calculators (though less accurate) or directly with professionals who offer this service for free.

Financial educator Natasha Janssens suggests researching and seeking professional advice before you have your entire deposit saved. Approximately one to two years before you expect to purchase a home, this preparation is beneficial as it sets expectations and helps avoid common mistakes. Avoid significant lifestyle changes during this time, as any new debts or changes to your financial situation could affect your borrowing capacity.

Additionally, discuss non-negotiables, must-haves, and nice-to-haves with your partner to ensure you're on the same page throughout the negotiation process.

It's essential to plan for the future, including discussing financial backup plans in case of unforeseen circumstances such as illness, injury, or unemployment. It's also prudent to consider insurance options like income protection to help cover mortgage payments during challenging times. Consulting ASIC's Moneysmart website for budgeting advice can help clarify how much you can afford to put towards your deposit.

A financial adviser like Scott Taylor emphasizes the importance of researching first-home buyer incentives early on, such as the First Home Super Saver Scheme. This scheme allows you to contribute to superannuation and claim it as a tax deduction, which can be pulled out when purchasing a home. Planning ahead for three years is recommended to maximize the benefits. If buying with a partner, it's crucial to understand each other's priorities, as differing expectations can lead to conflict during negotiations.

Lastly, meet with a professional to discuss your finances thoroughly. Understand your debts, credit card limits, savings, and living expenses. Consider additional income sources, and be aware of your joint financial position if buying with a partner. Stress test your finances to see how different scenarios, like rising interest rates or changes in income, might impact your ability to meet mortgage payments.

By understanding your finances, you can make informed decisions about your budget, spending habits, and overall lifestyle to ensure you're prepared for the significant commitment of homeownership.