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With the home ownership dream just out of reach for some, more Australians are choosing to rent rather than buy.

With the home ownership dream just out of reach for some, more Australians are choosing to rent rather than buy.

According to the finder.com.au Home Loan Insights Survey, 32% of the respondents choose to rent, which is a significant jump from last year’s survey, which was 10%. The survey also found that 14% said it was easier living with parents, which has also risen from 10%.

Despite the RBA cash rate being on hold since August 2013, the property market has not seen a great increase in first home buyer activity. According to Michelle Hutchison of finder.com.au, “first home buyers are not in a hurry to get into the property market as few plan to save a smaller deposit to get onto the property ladder sooner”.

In 2013, 62% of first home buyers were going to save a smaller deposit in order to get into the property market sooner, but this has reduced to 41% this year. According to this survey, 38% of prospective home buyers find it difficult to save a sufficient deposit. This has been one of the biggest concerns for first home buyers for a number of years. 

According to the Genworth Home Grown (Edition 5), prospective home buyers who believe that now is a good time to buy has steadily dropped since 2012. In September 2012, 57% of prospective first home buyers believed it was a good time to buy, this dropped to 49% in September 2013 and then to 37% in September 2014. This is a indication that it may becoming less attractive for first home buyers to buy in the current market. 

Another indicator is that first home buyer finance has also continuously dropped since 2009. According to the Genworth Home Grown (Edition 5), the percentage of first home buyers as a proportion of all properties financed was 31.4% in May 2009. This has dropped to just 11.8% in August 2014. 

So how can first home buyers become more pro-active and confident in order to boost numbers in the property and mortgage market? 

Prepare your finances: Before you can purchase a property, you will need to have your finances prepared and the sooner you can do this, the better. Obtaining a home loan pre-approval early will give you a limit to how much you can spend.  Also, as you have already completed the groundwork for the home loan application, you can confidently bid at a property auction or make an offer for a private sale. To get a pre approval you will need to complete an application and supply your documents. But don't think you have to wait in the queue to apply - it can all be done online from your lounge room. Once pre approved you will be ready to start looking.

Understanding how much you can borrow is quick and easy and can be completed on the go. To get instant feedback on how much you can borrow, try the State Custodians Instant Online Pre Approval. It only takes a few minutes and gives you an instant result and an email confirmation of all the details. Best of all you can experiment with different purchase prices and loan amounts to see which one works best for you.

Review your debt: Credit cards, personal loans, HECS debt and other ongoing financial commitments could affect your borrowing power. So, although you need to save for a deposit, it is also important to keep your debt under control. A large number of credit cards and personal loans can increase the number of enquiries on your credit report and if these outweigh your assets it looks out of balance for lenders and they will look at your application with caution. It is also important to note that when assessing your home loan application, a lender will use your credit card limit, not the amount you owe. So, even if you have $0 owing on the card, they will still include the limit. Therefore, if you have a credit card or large limit that you do not use, it may be beneficial to cancel or reduce it.

Become an investor: If you are able to live at home and don't mind doing so for longer, why not consider saving for a deposit to purchase an investment property? Living at home could enable you to fast track your savings and you may look to pay less for an investment property than one you want to live in. When you purchase you will have a better idea of what your contribution will be after the rental income. By living at home and having a good positive cash flow, this may be a lot less stressful than if you were paying rent yourself.