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How To Buy My First Home In 2024?

Do I Qualify As A First Home Buyer?

To qualify as a first home buyer you have to meet the following criteria

  • Be at least 18 years of age

  • Be an individual, not a company or a trust

  • Be an Australian citizen or permanent resident

  • Be purchasing the first home you or your partner have owned or co-owned in Australia

  • Be buying a relatively modest-priced property within the threshold of your state

  • Be committed to moving into the property within 12 months and living in it for at least 6 months

How Much Can I Borrow?

The initial steps to purchasing your first property are daunting - we get that! However, this first step is the best course of action to take when assessing where and what you can afford to buy. Calculating your income is nice and easy although calculating your expenses is often a confronting task. Most people would think they know exactly what they spend their money on until they look at their bank or credit card statements. This is one of the first things a lender will look at when assessing your loan application to ensure you can service the loan amount you are applying for. Our initial assessment to obtain your goals helps us provide you with the most appropriate product to suit your needs now and into the future!

What Is My Borrowing Power?

Borrowing power is exactly that - how much you can borrow. It is not your budget when looking for a property to purchase. Your deposit coupled with your borrowing power can determine your budget for your new property - less at least 1 months wages to ensure you have funds after settlement. Essentially, in a nutshell, the higher your income and lower your expenses the more you will be able to borrow. There are many factors that lenders will look at to assess you on your loan application. 

These include but are not limited to:

  • Verifying your exact income that gets deposited into your bank account periodically

  • Your current debts and the repayments you are making on them such as personal or car loans

  • Most lenders will look at your credit score and conduct checks into the findings however there are some lenders that don’t require a credit report

  • Serviceability requirements which is your ability to absorb higher interest rates, meaning that you might be able to afford your repayments if you are approved in the near future but can you afford them if the RBA increases the cash rate?

  • Personal circumstances, whether you have dependents and how secure your current employment is

  • Your current credit limits are seen as a red flag to lenders as they will assume you may spend up to your limit at any given moment

Important note, having a bigger deposit to put towards your property is more important than having a high income because it shows a pattern of saving.

Do I Need A Pre-Approval?

After our initial meeting we will submit your application for a conditional pre-approval. This means that the lender has approved your application with some conditions that need to be met in order to get the final approval or make it an unconditional offer. This is a critical step as now we can move on to the more exciting part of the process.

Where Should I Buy?

Once you have a conditional pre-approval you now have an estimated budget on how much you can spend on your first home. When deciding where it is important to note the government grants and concessions that are available to you. The most common one is the First Home Owners Grant (FHOG) which has certain criteria that has to be met. Another popular one is stamp duty exemption for properties purchased less than $600,000.

Consider asking yourself the following questions when choosing a suburb to live in:

  • Is it close to amenities?

  • Is it close to public transport?

  • Is it close to shops or a shopping centre?

  • Is it close to schools?

  • Is it close to parklands?

  • What is the neighbourhood like?

Should I Build Or Buy Established?

It is the battle of convenience vs customisation. There are benefits to both building new and buying established. One of the main benefits of building is personalisation, buying the lot of land you like and deciding on what to put on there can be exciting! Another benefit is the FHOG available to every first home buyer who builds a new home. However, with the FHOG, when it comes to buying established there are certain criteria that must be met to qualify. A benefit of buying an established property is knowing what you are getting before you buy. Unfortunately established property comes with wear and tear the older it is and limits your personal touch.

What Are The Upfront Costs Of Buying A Property?

Now that you know where you want to live it's time to calculate your upfront costs. These upfront costs would have been covered in an initial meeting to determine your budget. The biggest of the upfront costs is generally the deposit and stamp duty if it applies.

Be aware of hidden fees you might not have considered. Below is a list of costs you can expect to pay:

  • Deposit

  • Stamp duty

  • Lenders Mortgage Insurance

  • Insurance

  • Inspections

  • Conveyancing

  • Removelists

  • Borrowing Fees

  • Settlement Fees

  • Connection of Utilities

Do I Have Enough Of A Deposit?

While having a 20% deposit will help you avoid paying Lenders Mortgage Insurance (LMI), some government schemes will let you pay as little as a 2% deposit to get into your first home and avoid LMI. Another option to consider is the Bank of Mum and Dad (guarantor) to help provide additional security for lenders to help bolster your application and to avoid paying LMI. Your guarantor is someone who will co-sign your loan and become legally responsible for meeting your home loan repayments if you can’t. You’re more likely to need one if you have a bad credit score, low deposit or you are self employed. The upside of having a guarantor means getting into your dream home sooner and not having to save a 20% deposit or paying LMI, however, it could place your guarantor at risk if you don’t meet your home loan repayments. The person going guarantor should seek independent advice if you are considering it.

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