When Should You Buy Your First Home?

Buying your first home is one of the most important and exciting decisions you will ever make. But it can also be daunting, stressful, and confusing. How do you know when is the right time to buy? How do you find the best deal? How do you avoid common pitfalls and mistakes?

There is no definitive answer to these questions, as everyone’s situation is different. However, there are some general factors that you should consider before taking the plunge into homeownership. Here are some of them (And read to the end to see how we made $165,000.00 off our first home):

Your Financial Situation

One of the first things you should look at is your financial situation. How much can you afford to spend on a home? How much do you have saved for a down payment and closing costs? How much debt do you have and how will it affect your mortgage eligibility and interest rate? How stable is your income and how likely is it to change in the future?

You should also think about your long-term financial goals and how buying a home fits into them. Do you plan to stay in the same area for a long time or do you want to move around? Do you want to invest in other assets or save for retirement? Do you have other major expenses coming up, such as education, travel, or family?

A good rule of thumb is to spend no more than 28-35% of your gross monthly income on housing costs, including mortgage, property taxes, insurance, and maintenance. You should also have an emergency fund of at least three to six months of living expenses, in case of unexpected events or emergencies.

The Housing Market

Another factor to consider is the housing market. How is the supply and demand of homes in your area? How are the prices and trends? How competitive is the market and how much room is there for negotiation?

You should do some research on the local market and compare different neighborhoods, types of homes, and features. You should also consult with a real estate agent who can help you find the best deals and guide you through the process.

Generally speaking, you want to buy when the market is favorable for buyers, meaning that there are more homes for sale than buyers, prices are low or stable, and interest rates are low. However, timing the market perfectly is impossible, and you should not base your decision solely on market conditions (My story below is a perfect case in point of this). Instead, you should focus on your personal needs and goals, and buy when you are ready and able.

Your Lifestyle and Preferences

Finally, you should think about your lifestyle and preferences. What kind of home do you want and need? How much space do you require? What amenities and features are important to you? What location and neighborhood do you prefer? How do you envision your future in your home?

You should make a list of your must-haves, nice-to-haves, and deal-breakers, and prioritize them according to your budget and availability. You should also be realistic and flexible, and be willing to compromise on some aspects if necessary. You should also visit as many homes as possible, and compare them objectively and subjectively.

Ultimately, you should buy a home that suits your lifestyle and preferences, and that makes you happy and comfortable. You should also buy a home that you can afford and maintain, and that has the potential to appreciate in value over time.

We Built Our First Home In 2018

We built our first home in 2018, at the height of the market in Melbourne. It was a three-bedroom home in a new development, in Koo Wee Rup. We paid $506,000 for it, with a 10% down payment and a 30-year fixed-rate mortgage at 4.6%.

At the time, I was working at the gym and partner, Liv had just finished studies and was looking to start her first role as an occupational therapist, earning $130,000.00 a year between us. We had no other debt, and we had saved $60,000 for the down payment and closing costs.

We did not regret my decision, even though the market cooled down shortly after we bought, the housing market actually corrected in 2019. We also made some improvements and upgrades, such as doing some concreting out the back and doing the front landscaping.

In 2021, we decided to sell our first home, as we wanted to move to a bigger place and a little closer to Liv’s family. We decided to buy land and build again, but that is a whole other story to talk to. We were pleasantly surprised to find out that our little home in Koo Wee Rup had appreciated by $180,000 in three years, thanks to the high demand and low supply of homes in Melbourne. I sold it for $685,000, and made a net profit of $165,000 after paying off the remaining mortgage balance and the selling costs.

Just going to show, that even if you think you are buying at the height of the market, it still paid to get into the market, although past performance, especially over COVID times, will probably be very different to what happens in the future.

Buying your first home is a big decision that requires careful planning and preparation. You should consider your financial situation, the housing market, and your lifestyle and preferences, and buy when you are ready and able. You should also seek professional advice and assistance, and do your homework before making an offer.

Buying your first home can also be a rewarding and fulfilling experience, as you can enjoy the benefits of homeownership, such as stability, security, freedom, and equity. You can also make a profit if you sell your home in the future, as long as you buy smart and maintain your home well.

Until Next Time,

Take Back Control