A Complete Mortgage Guide for First-Time Home Buyers


A mortgage guide for first-time home buyers? Yes, please!

Many first-time home buyers find that getting a home loan can be a long, mistake-filled experience. These mistakes are made simply because they didn’t know certain things.

For instance, did you know that it’s not a good idea to change jobs or get a credit check in the mortgage application process? It’s true. Banks love stability and the more you can show that the more likely you are to get your loan approved.

Are you planning on purchasing your first home in Australia? Don’t miss out on this complete mortgage guide for first-time home buyers.

Since there’s an increasing number of first-time home buyers, we created this mortgage guide giving you all the important information you need to know before it’s too late.

Prepare Your Financials

The first step to getting approved is to get your financial house in order.

Banks will look at just about every detail of your income and spending over the last 3-6 months.

If you have debts, pay them off as quickly as you can. You don’t want to do anything that will have a negative impact on your credit score.

Getting a new credit card, or even in some cases closing old credit accounts can have a negative impact on your credit.

You’ll also have to manage your spending. Lenders generally want to see that you have plenty of money in your account at the end of every month and not just getting by.

Even if you’re in the early stages of planning, it’s best to check with a home loan professional to get ahead in the process.

Start Saving for Your Deposit

If you’ve made the decision to purchase a home for the first time, the first step to getting approved is to save up for your deposit.

How much do you need to save? That depends, but a general guideline is the more money you can put down, the better.

You can purchase a home with as little as five percent down, but be aware that you’ll probably have to pay Lenders Mortgage Insurance or LMI.

LMI is what lenders use to insure themselves in case you default on a loan. If you borrow more than 80 percent of the home’s value, the lender will require LMI.

It’s typically paid as a lump sum, but since most first-time home buyers don’t have that amount of cash available, it can be rolled into the mortgage.

The costs of LMI will depend on the home’s value, the percentage of your down payment, and the amount you’re borrowing from the bank. The higher the home value and the less you put down for a deposit, the more LMI you’ll pay.

Ideally, you’d want to save up to 20 percent of the price of your home, but most banks understand that it’s difficult to save up 20 percent for a down payment.

There are many financing options available. Be sure you partner with the right finance company to help find the right home loan for you.

Get Pre-Approved Before You Look at Homes

How much can you realistically borrow from a bank? That’s really going to depend on several factors, such as your income and credit history.

You really won’t know for sure until you start the home buying process. The first major step to take is to get pre-approved before you start looking at homes.

This way, you’ll save yourself the heartache of finding your dream home, only to find that you can’t get a home loan.

You can get a conditional pre-approval, which gives you (and sellers) a guideline as to how much you can borrow.

A conditional pre-approval is smart to have in a tight buyer’s market, because it shows sellers that you are ready to buy now, increasing your chances of getting into your dream home.

Grants for First Time Home Buyers

While the cost of a home is 11 times greater than annual income in Melbourne and 14 times greater in Sydney, it can be discouraging to first-time home buyers.

Did you know that there are grants available for Australian residents who are first time home buyers? That’s an important topic to be addressed in this mortgage guide.

The First Home Owner Grant is a national program funded by territories. Qualification for grants and how much you can expect to receive will depend on your territory.

What Are the Other Costs Involved?

We already covered LMI in this mortgage guide. What are the other fees involved in buying a home for the first time?

  • Stamp duty is a tax assessed on some purchases, even real estate. It’s the buyer’s responsibility to pay stamp duty within 30 days of closing. How much you can be liable for will depend on where you are buying.
  • Legal fees will also be required to have the property legally transferred to you and to make sure the title is clean. In other words, the seller can legally sell the property.
  • Lenders will also charge a loan application fees and sometimes valuation fees.
  • Inspection reports are necessary to make sure that the property you’re buying is structurally sound and is not infested with pests. Budget between $300-$400.
  • Water rates need to be factored in as well. You will be responsible for paying the water vendor for the rest of the year or quarter, depending on their billing cycle. This could be between $500-$700.

Now just because these are common costs involved in the home buying process, it doesn’t necessarily mean that you’ll pay them.

In July 2017, NSW Government rolled out a program to make the home buying more affordable. Stamp duty is abolished for homes under $650,000, grants are available for new homes.

The First Time Home Owner grant can also be used to pay for these costs.

A Mortgage Guide That Will Save You from Headaches

Buying a home may seem like an impossible dream for many first-time home buyers.

That’s why we created this mortgage guide to help save you from the pitfalls that so many first-time home buyers experience.

Beyond this guide, though, it’s so important to partner with a financial company with experience in owner-occupied loans and wealth building. Contact us and we will help make your dream of owning a home a reality.