First Home Buyers
Who is a first home buyer?
A first home buyer is someone who has never purchased a property either as an investment or to live in. First home buyers are generally very nervous but excited individuals who are ready to take the next step to owning their first home.
Am I ready to purchase my first house?
Getting a home loan is surely one of the biggest debts you will ever have in your life which is why it is very daunting and overwhelming thought. As brokers, we are there every step of the way to help guide you from working out your budget to pre approval to buying to settlement. Let’s have a look at the process to purchasing your first home!
The Process
SAVE FOR A DEPOSIT
Saving for a house is probably the hardest part of buying a house. This is the most crucial part of the process as it will determine the type of loan, maximum borrowing capacity and what schemes to qualify for.
Discipline and sacrifices need to be made in order to achieve the goal of owning your first home quicker. First thing is to work out a budget so that you can see how much you can put aside towards the deposit for a house and then stick to it. Try to aim for a 10% deposit however there are schemes that will only need as little as 5%.
ENGAGE A MORTGAGE BROKER
Once you have saved enough or ready to discuss the home loan application, this will be the time to engage your local knowledgable broker who will work out the maximum borrowing capacity. Your broker will collect your personal details to determine your overall financial position and calculate your borrowing capacity. Also the broker will explain the different types of loans and the pros and cons of each one. The broker will ultimately recommend a product that meets your needs.
ORGANISE PRE-APPROVAL
Pre approval is the next step once your broker has recommended a suitable loan. The reason why it is recommended to obtain a pre approval is to ensure that you have the confidence to purchase a house within a price range. Also this will help negotiate with real estate agents.
START RESEARCHING FOR
A NEW HOME
Once you have pre approval ready to go, it is now time to make friends with real estate agents to help search for your property. Make a list of what you want in a property and then start searching for areas you would like to live in that is within your price range. Visit the suburb and have a feel of the surrounding areas, what amenities/facilities are in the area, easy access to freeways or public transport etc. It’s important that you will feel comfortable in the area you choose to live in. It may not be your forever home but you definitely don’t want buyers remorse!
PRIVATE SALE VS AUCTION
Once you narrow down your property list, some properties will be sold via auction or private sale. Auctions are overwhelming and sometimes you end up paying too much because of emotion. It is recommended to attend some auctions to have a feel of how it works. One thing about auctions is they are sold unconditionally. Once the auctioneer accepts your final bid, you cannot change your mind and if you do there will be penalties so best to be sure that you are 110% sure you want that property. One thing good about auctions is you know who your competitors are. In a private sale scenario you dont know who your competitors are and can only go by what the real estate tells you. With a private sale scenario be firm with your offers and try not to get too emotional.
FINALISE PURCHASE
Before you start negotiations on a property, this is where you would need to engage a conveyancer to help you look through the contract of sale. A conveyancer’s job is to make sure there are no legal ramifications if you buy the property. Once the conveyancer has given the all clear, you can start to bid at the auction or make offers on the property depending on how they are sold. Just be prepared to pay the deposit once you are successful.
HOME LOAN SETTLEMENT
Once you have successfully bought a house you email the signed contract of sale to your broker to finalise the home loan approval. The bank will issue an unconditional approval and loan documents will be emailed to sign. Once all documents are signed your conveyancer will finalise their end to ensure the settlement of the home loan meets the settlement terms of the house purchase.
MOVE IN AND CELEBRATE
Congratulations you are officially a home owner! You have the freedom to hang as many paintings as you want in the house and also you can get a pet!
First Home Guarantee Scheme
The First Home Guarantee is a government incentive designed to assist first home buyers in purchasing their initial home with a deposit as low as 5%, eliminating the requirement for Lenders’ Mortgage Insurance (LMI).
LMI is a single insurance payment that safeguards the lender in case of default on home loan repayments. Typically, it applies when borrowing more than 80% of the property’s value. However, with the First Home Guarantee, the Government acts as a guarantor for your home loan, effectively underwriting it and removing the need to pay LMI.
Eligibility Criteria
- Applicants must be at least 18 years of age and be an Australian citizen or permanent resident at the time of entering the loan.
- Single applicants earning up to $125,000 or joint applicants earning up to$200,000. This will be determined based on providing a Notice of Assessment for the previous year.
- Declare that you are first home buyers and have not held ownership in a property within Australia for any purpose.
- Intended purpose to be owner occupiers of the property meaning that you will live there as your principal place of residence and not for investment purposes.
- From July 1, 2023 joint applicants can be extended to siblings, friends and other family members.
- Provide evidence of genuine savings equaling between 5% to 20% depending on the chosen lender
Other Eligible Concessions or Grants
1. First Home Owner Grant (FHOG) – When you purchase or construct your first new home, you can take advantage of a $10,000 First Home Owner Grant (FHOG). This grant applies to various types of properties such as houses, townhouses, apartments, units, and similar dwellings. Additionally, a new home can also include a residence that has undergone significant renovations or a property built to replace demolished premises. It’s important to note that the grant does not apply to investment properties or holiday houses.
2. First Home Buyer Stamp Duty exemption or concession – First home buyers in Victoria have the opportunity to benefit from either a duty exemption or a 50% reduction when purchasing a new or established property with a dutiable value of up to $600,000. If the dutiable value falls between $600,000 and $750,000, the duty concession applies. Additionally, the exemption or concession can also be applicable to vacant land purchases intended for home construction.
DISCLAIMER STATEMENT
This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders terms and conditions, fees and charges and eligibility criteria apply.