Buying a first home is a significant milestone that takes commitment to saving, careful decision making, and considered planning. The biggest hurdle for most first home buyers? Saving a deposit. Depending on where you are in Australia, it can take as long as eight years to save enough, all the while chasing down rising house prices which means having to save even more! If you are ready to buy your first home, here are a few things to consider.
1. Determine how much you can spend
A mortgage is quite likely to be the biggest debt you’ll ever have, which is why it’s so important to buy right. Deciding how much you have to spend – or more correctly, how much you can afford – will be a major factor in determining the size of your deposit.
Most lenders require a deposit of at least 10 to 20 per cent of the purchase price. That can be made up of your own savings, Government grants, and cash gifts from family or friends. To get an idea of how much you could afford to spend on a first home, use our home loan repayment calculator here. And for an estimation of how much you could possibly borrow, use this borrowing power calculator.
2. Check your credit report
Your credit report is an online record of your credit spending and repayment history. Every time you apply for credit, spend using credit, or make a repayment on a loan, utility bill or credit card debt, your credit score is calculated. Lenders use your credit score to determine how likely you are to default. And when you apply for a home loan, that will be one of the first things lenders will check.
If your credit report isn’t as healthy as you’d like it to be, there are some steps you can take to repair it. Check out this blog we wrote earlier this year about repairing your credit report from a poor score back to a good score.
3. Understand the costs
When it comes to buying a first home, many first home buyers are surprised at the extra, unexpected costs they incur. Not only do you need to consider the purchase price and how much your repayments will be each fortnight or month, but there are also a few other costs you’ll need to factor in to your house buying budget.
These include:
- Loan fees
- Lenders’ Mortgage Insurance
- Stamp duty
- Legal fees
- Building inspections
- Moving costs
4. Choose the right location
Location, location, location! That’s right, where you buy is often more important than what you buy. To help you decide on the right location, here are some questions to ask:
- How much are properties selling for in the area?
- How far will you be from family, friends or work?
- How developed is the infrastructure in terms of roads, public transport and nearby shops or schools?
- Is there potential for price growth in the area?
- What other developments are in progress or planned?
- What is the crime rate like?
Use online sources, talk to the local real estate company, and research as much as possible before deciding on location.
5. Check if you’re eligible for financial assistance
As a first home buyer, you may be eligible for Government financial assistance. Along with the Family Home Guarantee, which aims to help single parents buy a home with a two per cent deposit, the New Homes Guarantee program is being expanded to further support eligible first home buyers build or buy a new home with as little as five per cent deposit.
Under the First Home Super Saver Scheme, the amount that first home buyers will be able to access is also increasing. From 1 July 2022, eligible home buyers will be able to access up to $50,000 of their intentionally saved funds to use towards the purchase of a first home, up from the current $30,000. All of which go a long way to helping more first home buyers into their own first homes.
To find out more about buying a first home, accessing Government funding, or getting help from parents or family to buy a first home, talk to a Mortgage Express broker. Our team of mortgage brokers have already helped hundreds of first home buyers into their own home, and we’d love to help you too.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.
