There is perhaps no bigger decision you will make than the first home you buy.
The entire process from initial enquiry to final settlement can be extremely time-consuming. But being a homeowner also has its rewards. It becomes the place you settle down. Where you get involved in the community. And even raise a family with your significant other.
Getting started requires extensive planning. You cannot simply walk into your nearest financial institution and expect to get approved right away. First home buyers have a long road ahead of them so it helps to be prepared and know what to expect.
Here is what every first home buyer should know.
- Closely evaluate your finances
With cash rates at record lows, many are scrambling to buy their first property or refinance their loans. But you also need to seriously evaluate your finances. In some cases, it may make sense to continue renting so you can get your accounts in order and save for a deposit.
The right time to buy a home is different for everyone. Take a moment to ask yourself the following questions:
- Do you have good credit?
- Can you demonstrate steady income?
- Can you afford a mortgage and additional costs?
- Do you have enough for a down deposit?
- Do you plan to stay for at least a few years?
If you cannot honestly answer these questions, then you are likely not in a good position to buy a home. Consider setting up a consultation with a mortgage broker or lender to review your finances. They will be able to provide an honest assessment.
However, if you can answer “yes” to these questions then you are probably in a good position to buy your first home.
- Obtain a copy of your credit report
Every lender will check your past and current credit activity to determine your creditworthiness. Your credit has a large impact on the rates and terms you qualify for. So it’s a good idea to first review your credit.
Contact these agencies in Australia to request a copy of your credit report:
- Dun & Bradstreet
Credit reporting bodies are required to keep their information up to date by law. But errors can and do occur that may be affecting your ability to get a loan. Which is yet another reason why it’s so important to review your credit report.
If you notice any errors, contact the credit reporting body right away to have an investigation underway. In most cases you will need to provide proof so be prepared to contact the company in question. Fixing errors can be extremely time-consuming but is also extremely beneficial.
- Put down a sizable down deposit
You will need to put down a sizable deposit when applying for a home loan.
The actual amount depends on a number of factors including the price of the property and how much the lender requires. Putting down at least 20% means not having to pay for Lenders Mortgage Insurance (LMI). It also means saving more on interest over the long term.
Lenders typically require between 10 to 20% but others may allow you to put down less. When determining the down deposit you need to pay, keep in mind also there are additional costs with every loan. These include:
- Stamp duty
- Closing costs
- Conveyancing fees
- Building insurance
- Pest and building inspections
- Legal fees
Speak with your broker or conveyancer ahead of time to estimate these costs. This allows you to better prepare your finances so you have enough for the deposit and the additional costs which can easily run into the thousands.
- Consider seeking pre-approval first
Before looking for a property, you may want to first consider applying for conditional pre-approval. This means that a lender has reviewed your financial situation and determined how much you are able to borrow. Applying involves a complete assessment of your credit and confirmation of your income.
Now you can search for property that fits within your means. Pre-approvals can also be used as leverage as it demonstrates that a lender has already screened your finances. Potential vendors will know you are serious about making an offer.
Searching for a property can be a real challenge. Do some research on potential areas you would like to live in and the distance from your work. If you are browsing a listing, you may also want to check out the community in person.
- Check available grants for first home buyers
Did you know you can receive grants as a first home buyer?
You can receive a one-off $10,000 FHOG (First Home Owner Grant) payment when building a new home. However, certain conditions apply as you must be an Australian citizen and have never previously owned property. Unfortunately, the grant does not apply for established properties.
Are you buying your first home?
FHOC is here to help. We understand that buying a new home can be both exciting and stressful. Our consultants have extensive industry experience and work closely with you at every step of the way. From the initial enquiry to the settlement, you can expect quality services from us.
Contact us today to schedule a consultation with our building consultants. We are happy to answer your questions and provide assistance.
First Home Owners Centre Contact Information
24/7 Sales Enquiry Line: (08) 6144 1088