Deciding to buy your first home is a goal that many people have, and it marks one of the most exciting, yet daunting milestones of your life. It’s important to make sure you’re fully prepared to tackle the home-buying process because it certainly isn’t straightforward. Let’s explore some of the factors you should keep in mind when you’re looking to buy your first home.
How much can I borrow?
Perhaps one of the first questions you’ll have is about your lending capabilities. It’s important to note that this amount won’t be the same for everyone – there are a variety of factors that can affect this. To assess how much you’re eligible to borrow, lenders will consider your credit history, employment status, residency status and income1. When it comes to your employment, how long you’ve been in your role and whether you’re employed on a full-time basis will also be factored in. As for your credit history, any current debts you have (such as other loans or credit card debts) and any defaults on bills will influence how high your score is – you want to aim to have as high a score as possible1. It’s also a good idea to pay off loans, reduce credit cards and close down any AfterPay accounts, as these debts are taken into consideration in calculating the amount you can borrow.
How much do I need for a deposit?
In most cases, lenders will ask that you can produce 20 per cent of the property price as a deposit2. If you do not have a 20 per cent deposit, a lower deposit may still be acceptable but you will be required to pay Lenders Mortgage Insurance (LMI), unless you are eligible for a First Home Buyer Guarantee (FHBG) or the Regional First Home Buyer Guarantee (RFHBG). Generally, first home buyers will want to do everything possible to avoid paying LMI as it can be quite expensive and add to the amount of money you’re spending upfront2. It’s also important to remember that when you’re saving for your deposit, you should factor in a variety of upfront costs that can’t be avoided. These include application fees, legal fees and building or pest inspection costs2.
You should also do some research into stamp duty as there is often no fee for first home buyers, but there can be caps on how much you’re allowed to spend on a house (this varies from state to state)2. As with LMI, stamp duty can be quite expensive, so it’s always good to avoid this if you can. When it comes to deciding how much you should save for a deposit, aim to cover 20 per cent of the price of houses you’re looking at and then add on extra for all the upfront costs – some lenders recommend adding $10,000 as a safety net2.
What now?
Once you feel like you have enough money saved and are seriously looking at buying a house, it’s a good idea to book an appointment with a lender. They will discuss interest options with you, so it pays to do a bit of research and understand the difference between fixed and variable interest rates, and will also ask you about what kind of price range you’re looking at (this can help you narrow down your search fields)4. Lenders can also see whether you qualify for any Government schemes that can help you – for example, in Queensland, there are Government grants such as the Regional First Home Buyer Guarantee and the First Home Buyer Guarantee2.
What to look for in a house
Obviously, everyone is different so there is no clear-cut rule for finding the right house for you. What you can do though, is start considering your ‘must-haves’ and ‘nice-to-haves’4. Essentially, must-haves are the features you deem absolutely necessary in a home – this could be a large yard, a certain number of bedrooms or bathrooms or proximity to schools and public transport. Nice-to-haves are features you don’t deem to be vital and could live without until you find a solution (such as renovating)4. Once you have an idea of what you’re looking for in a house, it’s a good idea to get pre-approval for a loan so you can put in offers when you see houses you really like. This makes the process of formalising the purchase agreement so much easier and quicker4.
Moral of the story
Buying your first home can be a bit overwhelming, but it’s also such an exciting moment that you want to make sure you’re as prepared as possible so you can focus on the celebrations. Drawing on help from others, such as a lending specialist at Queensland Country Bank or broker, and a solicitor, can help to make the process simpler and allow you to direct all of your attention towards the houses you’re considering. Keep this in mind and you’ll be well on your way to making your dream a reality.
At Queensland Country Bank, we have fixed and variable loans available to choose from and also support Government Housing Schemes designed to assist first home buyers.
Review the Home Loans Product Information Brochure and the relevant TMD’s available at queenslandcountry.bank. Normal lending criteria, terms, conditions and fees apply and are available on request.
General Advice Warning: This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information in this article, you should consider the appropriateness of the information provided. In particular, you should seek independent financial advice.
Sources
1Richard Whitten & Sarah Megginson, 2022, 10 top tips for first home buyers in Australia, Finder, https://www.finder.com.au/tips-for-first-home-buyers-in-australia
2AMP, 2022, 9 tips for first home buyers, https://www.amp.com.au/insights-hub/property/buying-a-home/first-home-buyer-guide
3Jessica Mudditt, 2022, What is stamp duty?, Forbes, https://www.forbes.com/advisor/au/property/what-is-stamp-duty/
4Moneysmart, 2022, Buying a house, https://moneysmart.gov.au/buying-a-house