Buying your first home
There are few bigger milestones in life than the
purchase of your first home. While it is certainly an exciting process there
are a number of considerations you’ll need to take into account before you can
begin your journey. Most first home buyers will be looking at using finance to
buy a property, and with that comes some important factors that they’ll need to
check off.
Work out your budget
When purchasing a home you need two things – a deposit
and the ability to borrow money from a lender. For first home buyers, the
biggest hurdle is often getting a deposit together. While most people assume
you need to come up with a 20 per cent deposit, for first-time buyers, there
are a range of options that can help you get started sooner.
While lenders will want you to typically have some genuine savings together, there are programs in place that can help you get a loan with as little as a 5 per cent deposit. The Federal Government’s First Home Loan Deposit Scheme (FHLDS) allows first home buyers to put down just five per cent. With this loan product, the Government will effectively guarantee the loan, helping first home buyers avoid Lender’s Mortgage Insurance.
It’s also possible to get the help of your family with
a guarantor loan. This works in a similar fashion to the FHLDS, in that your
family member will use the equity in their home to guarantee that deposit
amount and avoid LMI.
Get pre-approved
A good idea for a first home buyer is to start having
a conversation with their mortgage broker very early on in the process and
discuss getting a preapproval.
A pre-approval is a conditional loan approval that
gives borrowers an indication they can potentially get finance, assuming their
chosen property meets certain criteria. While it’s not a guarantee, it is very
helpful as it gives the borrower clarity around exactly what they are able to
borrow. It also makes sure they’ve got all their financials and documentation
together.
This will help when the time comes to make an offer or
bid at auction, as the buyer has a very clear understanding of what they’re
able to pay and how that is going to impact their monthly spending habits.
Understand additional costs
When buying a property there are normally a lot more
costs than just the purchase price of the home. First home buyers can sometimes
make the mistake of not budgeting appropriately for all the additional expenses
that can come up early on.
The main cost for most buyers is normally stamp duty,
however, a first home buyer can be exempt based on their circumstances and the
purchase price of the property. Similarly, a first home buyer can avoid LMI if
they are able to qualify for one of the previously mentioned loan programs.
However, there are other costs that will be required
to pay upfront, including building and pest inspections and conveyancing costs.
When you settle on the property, you’ll also have to pay for things like your
share of the rates, strata fees, water, as well as insurance.
Being aware of what costs are likely to be involved before making an offer will put you in the best position to budget and move into your new home without any financial stress.
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Important note:
While every care has been taken in the preparation of this article, ADNA Financial Services makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Material contained in this news item is for general information only. It comes from a number of sources. Some of the content is provided by external writers. Any advice provided within the various articles is of a general nature only and should not be construed as providing advice on any of the topics discussed. Your needs and financial circumstances have not been taken into account.
© First published 06 April 2022