Buying your first home is an incredibly exciting time! It marks the first step of a new chapter in your life. However, it is not always a walk in the park, since there are a lot of things you need to get organised before you take the leap. There are some stress and a lot of hard work that comes with saving a deposit and finding the perfect property to move into. Therefore we wanted to write this blog for you first home buyers. We’ve put together a list of hints and tips to look out for, to help you navigate the first home buying process in the smoothest possible way.
Sorting out the finances
The first step of buying your first home is getting the finances sorted out. This includes how much of a deposit you need to save. It also includes arranging where you are going to get the financing from and working out how much you need to borrow.
Before you buy your first home, you’ll want to start saving up a deposit. Though it’s usually best to aim to save 20% of the property price. This is so you don’t have to pay for Lender’s Mortgage Insurance. To do so, you need to have an idea about the price of the property you are going to buy. The more you can save the better since you will end up paying less in interest rates down the track.
In some cases, you don’t have to save a 20% deposit. You may only need to save 10 – 5% of the property price and receive a 90-95% home loan. However, in this case, you will have to pay for Lender’s Mortgage insurance (LMI).
The first home owners grant
As a first home buyer, another option you may want to consider is whether you are eligible to get the first home owners grant. This is a government run initiative that grants Australian first home buyers with a $15,000 – $20,000 deposit. The initiative is a platform designed to help Australians get into the property market. It is available to Australian citizens or permanent residents who are buying or building a brand new home.
You can only get a $20,000 deposit until the June 30th, 2018. After this date, it will drop back to just a $15,000 grant. So, if your thinking of buying a new home soon you may want to get in there quickly! To find out more about the First Homeowners Grant head to their website which lists everything you could possibly need to know about it.
The Queensland government is currently offering a platform for first homeowners to get into the game in the way of a $20,000 handout for brand new homes bought.
However, time is fast running out if you are buying your first home, to take advantage of a $20,000 first homeowners grant, which is closing on June 30, 2018. After June 30 the grant will return to its original $15,000 amount.
The home loan
One of the most important things you need to do when buying your first home is shop around and find the best home loan. There are many lenders out there, and you want to make sure you find the right ones to suit your needs the best. Not only do you want to find a lender that offers you a good interest rate, but you’ll also want to find one that offers features that you are happy with.
Things to do before buying your first home
Before you take the leap to buy your first home, there are a few things you need to have organised first. Here is a list of thing to do before you buy…
Get your finances in order
Before you get a home loan, you’ll want to make sure you have all of your finances in order. This includes paying down any outstanding debts that you have. This is because taking on a home loan means you will be assuming a much larger debt. Paying off your debts will also make it more likely for you to get approved for financing from a mortgage lender.
Work out what can you afford
You may have to compromise and be realistic when it comes to buying your first property. When buying your first home you may have to buy a smaller property or a property in a neighbouring area if your affordability is not where you want it to be, so be prepared for this just in case. The best way to work out what you can reasonably afford is to work out what your budget is. You can do this by weighing up your income versus your expenses, and see how much in terms of repayments you can comfortably fit into your budget.
Do some research before you buy
Buying your first home is a big financial commitment so it’s important to do your research before you buy. Here is a list of some of the things you may want to research before you take the plunge:
Educate yourself on the area you want to buy in!
Check out realestate.com and see what median house prices are going for.
Go to open homes and auctions to see what kind of interest is in the area. If there are a lot of buyers at an auction or open home this will indicate that there is a lot of demand in the area. This could ultimately push the prices up.
Get approved for finance
After you have done a bit of research you may want to get pre-approval from a lender first. Therefore, you will have the piece of mind that you already have access to the finance. Then you find a house you want to apply for.
Useful questions answered for First Home Buyers
The first home buying process is somewhat complex. Therefore you want to make sure you are fully prepared before you embark on the home buying journey. Therefore we’ve decided to answer some useful questions for first home buyers.
What if I can’t save a 20% deposit?
If you are ready to buy your first home, but you can’t save up a 20% deposit, that’s okay. There are some other options available to you. As mentioned above you may only need to save 10 – 5 % deposit. However, you will have pay Lenders Mortgage Insurance.
What is an LVR?
A term you might come across when you buy your first home is Loan to Value Ratio (LVR). You can calculate LVR by dividing the amount of your loan by the purchase price. Lenders will use this to decide how risky it will be to lend to you.
What is a mortgage broker?
When buying your first home a mortgage broker can be very useful. Essentially they are a type of financial advisor that helps you to find a home loan. They can show you many different options when it comes to banks and interest rates. They can also walk you through some steps that may seem confusing and help to guide you through the process so that you feel more confident. Since they specialise in helping borrowers find the right deal for them, they can help you to submit the loan application on your behalf. This will help to achieve the best chance of a positive outcome.
You won’t pay any direct cash to your mortgage broker, the lenders pay them a commission. Their job is to introduce new customers to the bank.
Can I use my super to buy my first home?
In some cases, you can use your superannuation money to help you buy an investment property. Though it must be a self-managed super fund. However, you can’t use your superannuation fund to buy your first home. This is because your superfunds are investment funds and exist to serve the purpose of generating you more income.
However, the Committee for Economic Development in Australia (CEDA) wants changes with Australian Superfunds. They want to allow Australians to use their superannuation when buying their first home.
They are reasoning that allowing individuals to use super when buying your first home could prevent poverty in old age with our ever-increasing elderly population.
Ultimately, when buying your first home there are many factors to consider to ensure you get the best deal. Though if you consider everything above, your journey to owning your first home should be as smooth as possible.