Why you shouldn't rush into your first home

Money reader Jemma saved long and hard to get a deposit to buy a two-bedroom unit in a suburb she wants to live in.

She's now unsure about buying given prices are dropping and may drop further.

Well Jemma, in reality very few people, even those who follow markets very closely, buy at the bottom and sell at the top.

Timing can be important for an investor, but it is not nearly as vital for a home buyer.

In a weakening market there is no need to rush - which is a luxury in itself. You have your deposit, know your overall budget , and where you want to buy.

That is a really good start for any first home buyer.

Now prices are trending down, think about strategies. Three come to mind:

• Buy a two-bedroom unit as planned but pay less than you budgeted for. This would mean lower mortgage payments and more money in your pocket to save for other goals, such as travel, investing or further education to increase your job prospects.
• Research whether your budget would now buy a two-bedroom house rather than a unit in your chosen area. More land is valuable. The old real estate adage is: land appreciates, buildings depreciate.
• If you hate gardening and are set on a unit, maybe you can afford three bedrooms, or a unit with two bathrooms, or a bigger living area. You could rent one of the bedrooms out to pay your mortgage faster.

No matter which strategy you go with, buying in a quiet market where prices are on the way down will usually result in a better buy than if you are in a frenzied market where prices are rising so fast you just buy what you can without really having time to draw breath, not to mention analysing whether it's a good buy or not.

Keep in mind it's a buyers' market at the moment - something that does not occur that often in most Australian CBDs - and take advantage of it.

For example, if you want a quick settlement because the lease is up on your rental property and the landlord wants it vacant, you have the whip hand to ask your vendor to accommodate this.

Or maybe it's the opposite - you want to delay settlement for a specified period?

Chances are if you are the only buyer in the offing your wish will be granted.

Maybe the building inspection shows your chosen property has costly defects that need rectifying.

Ask the vendor to lower the price to help pay for the work and if he or she won't budge move onto another property - remember, you call the shots!

Now you have time on your side you can make sure you have the best home loan for you.

Now there is uncertainty about rates some interesting deals are emerging, particularly in fixed rates, which have fallen.

If you don't want to lock in all of your loan, maybe fix part and stay variable on the rest.

With loans flexibility can be almost as important as the interest rate.

Most people want loans where you can make extra payments and redraw if necessary without fees or any other penalties.

Many people also want a mortgage offset account where every dollar you deposit helps reduce your mortgage interest but still gives you everyday access to the money.

You pay no tax on the effective interest (your mortgage rate) earned on this money.

Do not put off your plans to become a home owner because of the state of the market, but do take advantage of the circumstances to secure yourself a better deal.

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