You decided to buy your first house, but you have no idea where to start from. You try to talk to friends, do some online research, and ask people at work, but everything just sounds like a bunch of information you have never heard of before.
Buying a first home can be overwhelming and tiring at the beginning. We know that! And this is why we put together this first home buyer checklist with the 5 most important things to understand at this stage.
First home buyers checklist: 5 steps to buy your first home in Australia
1 – Prepare for the Deposit
First, it is essential to understand that you will need at least a 5% to 10% deposit to buy the house. Without the deposit, it can be very tough to buy a home in Australia.
Although it is possible to buy a property with only 5% deposit, it is important to keep in mind that there are also other costs involved, such as stamp duty, registration of title, legal and conveyancing fees, building and pest inspections and insurance. These expenses usually correspond to 3% of the property value.
If you already have some savings, great. It is now time to do some accounts and organize your financial life for this journey. But if you have nothing at all, the first step is to start saving little by little. Depending on your income and expenses, you might have to postpone your purchase a little bit until you have saved up enough.
In the meantime, search for neighbourhoods you would like to live in, found out the real state market value in that area, get informed little by little and find a professional you trust to help you with the process ahead.
We have another blog post explaining all about the deposit, you can check it out at this link.
2 – Check If you qualify for Government grants
The Australian government offers some grants, concessions and schemes to encourage first home buyers to purchase a property. These benefits vary from state to state, so here is the second topic of this First home buyers checklist: remember to ask your Mortgage Broker for each one you qualify.
Most states, such as NSW, VIC, QLD and SA, offer the First Time Home Owners Grant (FHOG), which basically helps you increase your deposit and, as a consequence, improve your eligibility for a home loan.
There is also the Stamp duty concessions, which applies to first home buyers purchasing new or existing homes and allowing them to access up to a full tax concession, depending on the property’s price and the state or territory they are buying.
Please check our post on First Home Buyer Grants and benefits in Australia, for more details.
3 – Get Pre Approved
The pre-approval is an agreement from the bank you are looking to borrow from stating that they are willing to lend you a certain amount of money to buy a house.
To get approved for a mortgage, you will be requested by the bank to provide some documents to prove your financial capability and stability. This is a written agreement that allows you to know your maximum available funds to organize the price range and focus on houses you can afford.
Besides, it makes your offer much more attractive to the seller, once it shows you have higher chances to get the loan approved for a successful purchase.
If you want to learn more about how the Pre-approval works, please check out this blog post.
4 – Understand your borrowing capacity
When you buy an owner-occupied property, you are eligible to borrow up to 95% of the property’s value. However, each bank will offer different loan rates and ask for specific requirements, depending on your annual income, living expenses, other debts, etc.
This is why we always recommend our clients organize their financial lives by understanding the total income and expenditures they already have in their daily lives and how much they would be able to afford on repayments.
This exercise helps determine how much you can pay for a property, and it will also help guide your market searches.
5 – Find a professional to help you in this process
The whole process listed in this first home buyers checklist is a bit stressful and time-consuming. But you don’t need to do this alone: this is when a mortgage broker’s expertise is most welcome to save you time, money, and energy.
This 5th step would actually be even more helpful if you do it right before anything else. Do you remember the overwhelming situation of talking to friends, people at work or trying to figure out on your own things that you have never heard of before?
A Mortgage Broker would make it way easier!
These professionals act as intermediaries between lenders and borrowers. In order words, they understand the home-buyer profile and match it with the several different options of lenders out there.
This is exactly what we do at Capta Financial: we sit with you, analyze your situation, and based on your profile, we recommend the best lender for you to work with, guiding you through the whole process. From preparing the deposit, checking government grants, finding out your credit score, understanding your borrowing capacity and applying for a home loan to finally buying your dream house.