Know Your Money Situation

Before you start looking at houses, you need to understand your finances completely.

Calculate Your Income

Add up all the money you earn each month: - Your main job salary - Any side jobs or

freelance work - Regular bonuses (be conservative with estimates) - Investment

income

Track Your Spending

Write down everything you spend money on for at least 3 months (Australian

Securities and Investments Commission, 2024). Include: - Essential expenses: rent,

groceries, utilities, transport, insurance - Discretionary spending: dining out,

entertainment, subscriptions, clothes

This will show you where your money really goes and where you might be able to save

more.

Check Your Credit Score

Your credit score affects whether you'll get a loan and what interest rate you'll pay. Get

a free credit report to see where you stand: - Scores above 700 are good - Scores above

800 are excellent - Fix any errors you find

Deal With Existing Debt

Lenders look at all your current debts when deciding how much to lend you: - Credit

card limits (not just what you owe) - Personal loans - Car loans - HECS debt

Consider paying down high-interest debt before applying for a home loan.

Understanding How Much You Can Borrow

Banks don't just look at your income - they consider many factors:

The Serviceability Buffer

Banks must check if you can afford loan payments at interest rates 3% higher than

current rates (Australian Prudential Regulation Authority, 2023). This significantly

reduces how much you can borrow.

The 30% Rule

Traditionally, housing costs shouldn't exceed 30% of your income. In expensive NSW

markets, this might not be realistic, but try to keep total debt payments under 40% of

your income.

Employment Matters

Permanent full-time jobs are viewed most favorably

Casual or contract work may reduce borrowing capacity

Self-employed people need two years of tax returns

Saving for Your Deposit

How Much You Need

Minimum 5% deposit (but you'll pay extra insurance)

10-15% is more realistic

20% deposit avoids mortgage insurance entirely

Saving Strategies

Set up automatic transfers to a high-interest savings account

Cut unnecessary expenses

Consider living with family temporarily

Look into government assistance programs

Additional Costs to Budget For

The purchase price isn't everything. Budget for: - Stamp duty: Can be

50,000+ depending on property value - Legal fees: 3,000 - Building and pest

inspections: 1,500 - Moving costs: 5,000 - Immediate repairs or

improvements

Government Help Available

NSW offers several programs for first-time buyers (NSW Revenue, 2024): - First Home

Owner Grant - Stamp duty exemptions or reductions - Shared equity schemes - First

Home Super Saver Scheme (Australian Taxation Office, 2024)

Research what you might qualify for early in your planning.

Getting Pre-Approved

Before house hunting: 1. Get pre-approval from a lender 2. This shows sellers you're

serious 3. Helps you understand your realistic budget 4. Speeds up the buying process

Final Tips

Start preparing at least 6-12 months before you want to buy

Don't rush - take time to improve your financial position

Consider getting advice from a mortgage broker

Remember that buying a home is just the start - budget for ongoing costs like

rates, maintenance, and insurance

The Bottom Line

Buying a home in NSW requires careful financial planning (Reserve Bank of Australia,

2024). Take time to understand your situation, improve your credit score, save

diligently, and research all available options. With proper preparation,

homeownership is achievable even in today's challenging market.

Remember: it's better to wait and be properly prepared than to rush into a purchase

you can't comfortably afford.

References

Australian Prudential Regulation Authority. (2023). Housing lending standards:

Reinforcing guidance on exceptions. APRA. https://www.apra.gov.au/housing-lendingstandards-

reinforcing-guidance-on-exceptions

Australian Securities and Investments Commission. (2024). MoneySmart: Budgeting.

Australian Government. https://moneysmart.gov.au/budgeting

Australian Taxation Office. (2024). First Home Super Saver Scheme. ATO.

https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/firsthome-

super-saver-scheme/

NSW Revenue. (2024). First Home Buyer. Revenue NSW.

https://www.revenue.nsw.gov.au/grants-schemes/first-home-buyer

Reserve Bank of Australia. (2024). Financial Stability Review. RBA.

https://www.rba.gov.au/publications/fsr/

Disclaimer

This document is for informational purposes only and does not constitute

financial advice. The information presented here is compiled from various articles

and sources and is intended to provide general guidance on financial preparation for

home buying in NSW. Individual circumstances vary significantly, and readers should

seek professional financial advice from qualified advisors before making any financial

decisions. The authors and publishers of this report do not accept responsibility for

any financial decisions made based on the information contained herein.