First Home Owners Guide

What to consider before even looking for a house

Your Budget

  • It is important to first consider your own finances, income and predicted income to determine what you can afford in terms of monthly loan repayments. Once you have an amount in mind you can use this to figure out the size of the home loan what type of property you can afford.

Deposit

  • The deposit is a vital step in buying your first house and the greater a deposit you can put down the more you can leverage this to secure a lower interest rate. Traditional home loans generally require more than 10% deposit although you may be able to secure a home loan with as little as 5%.
  • There is an added incentive to saving a 20% deposit as you will be able to avoid paying Lender’s Mortgage Insurance

Understanding Costs

  • Stamp duties; this state tax is likely to be your biggest expense aside from the actual property price. The good news is that as a first home buy you may be exempt from stamp duty or similarly entitled to a rebate or concession.
  • Building and pest inspection; you want to make sure you are protecting yourself from unseen structural damage and pests such as termites. This may seem like an avoidable expense but doing these inspections when you are ready to buy but before the contracts are signed could save you thousands down the track.
  • GST for new dwellings; brand new properties may have to pay tax on valuation and inspection.
  • Legal fees; transfer of title, contract reviews and property and title searches are the main legal fees to be aware of. It is important to enlist the help of a solicitor or licensed conveyancer who can provide you with a quote for legal fees.
  • Lender’s Mortgage Insurance; as mentioned previously if you are financing your home with less than a 20% deposit you will have to pay for insurance to mitigate the lenders risk.
  • Land title fees; the Land Title Office will charge a registration fee whenever you submit any documentation related to your dwelling.

Looking for a house

Property Checklist

  • Buying your first house is a huge commitment and you will hopefully be living in it for years to come, so it’s important to make sure the house suits your immediate and long-term needs. There is a range of questions and decisions that you should be using to shape the kind of property you want to look for. For example, you may be a small family of three right now but do you plan on having another child? Do you want buy a finished product, something to renovate, or do you want to knock it all down and build your dream home?
  • Regardless of what you want these are the questions you need to ask yourself to get a good idea of the type of property you are looking for. Having a clear picture of the type of house you want to buy can help you budget better for your initial deposit and decide on the type of home loan you need.
  • There are a range of resources online to help you formulate a checklist such as https://www.aussie.com.au/home-loans/first-home-buyer-guide/property-checklist.html

FHOG

  • The First Home Owners Grant is a $7,000 grant offered to eligible buyers to make it easier to enter into the property market. The FHOG changes from state to state and eligibility is usually pegged to property value. For example, in NSW first home buyers whose total property value is under the $835,000 cap are eligible for the grant

Home Loan Considerations

  • There are a range of home loan options and we provide a handy guide to interpreting the different types.
  • However, you don’t need to wait until you’ve found the property you want to buy to take out a home loan. Many lenders allow you to get a loan pre-approval, which outlines the size of your loan limit and allows you to make offers on properties. A loan pre-approval is not a necessity although it does make the sales process a lot smoother and reduces your legwork between bank and seller significantly.
  • Tip: Make sure you rid yourself of any excess debt before applying for your home loan. Firstly, you want to make your home loan your top priority but more importantly you want to ensure your credit rating is as strong as possible. This will help you in securing a lower interest rate and could save you thousands in the long run.

Buying a house

How to Make an Offer

  • Making an offer is more likely than not going to be through an auction or through private treaty with a real estate agent. It is uncommon although not unheard of to purchase a property from a private sale (no agents).
  • When dealing with a private treaty, the first thing you need to remember is that making an offer costs you no money and that most properties are sold below their asking price. It can pay to make a low first offer as you leave yourself room to negotiate. Also, the seller’s response to an offer you perceive as too low may surprise you (you’ve got to be in it to win it).
  • Auctions, are a high-pressure environment and bring with them a level of risk and uncertainty. It is exactly those conditions that can see you snap up a great bargain or be coerced into paying above your previously established budget. The trick with auctions is to stick to your limit and not let yourself be drawn into a bidding war that leaves you out of pocket.
  • If you find yourself dealing with an individual instead of a real estate agent, it is important to handle negotiations and the sale process with some diplomacy. The owner is likely to be emotionally attached to the property which may influence their approach to selling and negotiating.

Exchanging contracts

  • This step comes in after you’ve agreed to a price with the seller and are preparing to settle on the house.
  • It is important that you have your solicitor or conveyancer look over the appropriate documents. These documents are usually prepared by the seller and therefore it is necessary that you ensure you aren’t agreeing to any hidden conditions or that your plans for the property aren’t inhibited with areas such as zoning and heritage lists.

Incentives/Grants

  • Aside from the FHOG there are a number of grants available to first home buyers and it is important to check with the Office of State Revenue in NSW and relevant offices in other states to see what you are eligible for.
  • For example, the best case scenario in NSW could see the first home buyer save a massive $34,361.