Quick Guide to Buying Your First Home

Buying your first home is a huge milestone and is certainly an exciting time. However there are a few things you’ll need to take into account before you begin your journey.

If you’re like most first home buyers, you’re likely to be planning on using finance to buy a property, so there are a few important factors that you will need to check off.

Decide on your budget

When buying a home, you need two key things from a financial perspective – a deposit and the ability to borrow money from a lender.

The biggest hurdle for first home buyers is often the first one – getting a deposit together. While you might assume that you will need a 20% deposit, there are actually a range of options available to first home buyers that can help you get started sooner.

Lenders will typically want to see that you have some genuine savings, however there are programs in place that can assist you with getting a loan with only a 5% deposit.

The Federal Government’s First Home Loan Deposit Scheme (FHLDS) allows first home buyers to put down just a 5% deposit. With this loan product, the Government will effectively guarantee the loan, helping first home buyers avoid Lender’s Mortgage Insurance (LMI).

Another option is a guarantor loan, which works in a similar way to the FHLDS, with your family member using equity in their home to guarantee the deposit amount and avoid Lender’s Mortgage Insurance.

Get preapproval

It’s a good idea to start having a conversation with your mortgage broker early on in the process of buying your first home and discuss getting a preapproval.

A preapproval is a conditional loan approval, which gives borrowers an indication they can potentially get finance, under the assumption that their chosen property meets certain criteria. Although it’s not a guarantee, it will give you clarify around what you will be able to borrow, and will also ensure that you’ve got all your financials and documentation together.

When it’s time to make an offer or bid at auction, the buyer will have a clear understanding of what they’re able to bid and how it’s going to impact their personal finances.

Be aware of the additional costs

Buying a property entails a number of costs other than the purchase price of the home. Don’t make the mistake of not taking these into consideration and budget appropriately for the additional expenses that can come up early on.

The main cost for most buyers is usually stamp duty. That being said, as a first home buyer you may be exempt based on your circumstances and the purchase price of the property. A first home buyer can similarly avoid Lender’s Mortgage Insurance if they are able to qualify for one of the aforementioned loan programs.

On top of this, there are additional costs that you will have to pay upfront, including conveyancing fees and building and pest inspections. Upon settling on the property, you will also need to pay for things like your share of the rates, water, strata fees, as well as insurance.

Having a solid understanding of what costs are likely to be involved before making an offer will put you in the best position to budget and buy your first home without any financial stress.

This article is intended to provide general information of an educational nature only. It doesn’t take into consideration your personal financial situation and should not be relied upon as financial advice.