How Much Money Can You Borrow as a First Home Buyer?

Everyone's financial situation is unique. We all have different incomes and expenses, and your borrowing capacity as a first home buyer may be impacted by these numbers.

Anyway, remember how we said it's best to chat with your finance specialist AKA mortgage broker prior to wanting to buy your first home? Well, here’s a few things you should be prepared to discuss with them when figuring out how much money you may be allowed to borrow as a first home buyer.

How much do you earn?

It’s time to add up how much you earn. This income may be in the form of hourly wages or an annual salary, plus any bonuses, allowances, or side hustles.

Your different types of income may be assessed at different rates by lenders so be sure to share any nitty gritty details with your mortgage broker. For example, don’t forget to mention if you earn money from things like selling fanfic inspired merch or homemade candles. Being open about your income makes it easier for your finance specialist to advise you on your lending options.  

How much do you spend?

It’s not always easy to keep track of what you spend. But, when it comes to applying for a home loan, mortgage brokers and lenders need to check you can meet the mortgage repayments without ending up in undue hardship. So, be ready to share your living expenses for the last 3-6 months.

Keep in mind your living expenses aren’t just the essentials like rent, food, and fuel, but also any subscriptions, memberships, or money spent on fun stuff like going to the footy and on holidays.

Your finance specialist may be able to advise you on any spending habits you could change to help convince lenders to view your transactions more favourably. But remember it’s important when setting a long-term budget that you don’t cut out everything you enjoy as it may feel harder to focus on reaching your financial goal.

How much do you owe?

Working out how much you already owe is very important when preparing to apply for a home loan. When it comes to counting what you owe, be sure to remember any credit cards, student debt, and personal or car loans. This even includes interest free loans and debt-free credit cards.

Lenders also consider what you owe on any buy-now-pay-later services, so keep that in mind if you often enjoy a bit of online retail therapy after a long day at work.

Speak to your finance specialist, if you’re unsure whether something needs to be disclosed as a liability to lenders.

So, how much should you borrow?

Sometimes it's about how much you should borrow instead of how much you can. After you’ve gone through all your income, expenses, and liabilities with your finance specialist, they’ll be able to advise you on your maximum borrowing capacity.

But keep in mind that a mortgage is a long-term commitment. When deciding how much to borrow, you need to consider whether you’re likely to have any additional long-term expenses in future, such as raising kids or frequently visiting family members who live overseas.

Chat to your finance specialist about figuring out how much you’re able to borrow then work out how much you feel comfortable borrowing.

The money stuff may feel a bit overwhelming as a first home buyer, but that’s why you should talk to a mortgage broker so they can guide you through the process.