Buying your first home is a huge achievement but it can also be completely overwhelming, as you navigate a whole new world of loans, taxes and laws that can confuse even the most seasoned investor.

With so much at stake, knowing exactly what you’re getting into is key, which is why we’ve put together 11 tips every first home buyer should know before climbing onto the property ladder.

 

Make sure you’re eligible for a home loan

Before you start researching dream properties, it’s important to know whether you are eligible for a home loan, and how much you can borrow. If a bank isn’t willing to lend you money, getting too excited about property hunting is only going to lead to disappointment. Start by trying a home loan eligibility calculator to gain a better understanding of where you stand and to give you a realistic figure to work towards. Next, contact different lenders to see what they can offer for your circumstances. The more lenders you contact, the more likely you are to find a good match for your needs.

 

You may be eligible for the First Home Buyers grant

To help first home buyers get into the property market, each state and territory government offers cash incentives to help towards your house deposit, starting at approx $10,000 depending on your location. To access these grants, you do have to fulfil certain criteria, but even if you don’t qualify, you may be eligible for a stamp duty discount or exemption. These types of incentives can save you a lot of money and fast track your property dreams, so it pays to do your research and find out what you may be entitled to.

 

You need to save more than just the home loan deposit

Saving for a home loan requires more than just budgeting for a 20% mortgage deposit. There are multiple costs in the process such as stamp duty, home inspection reports, conveyancing fees and other charges that are expensive but necessary. When planning your budget, make sure you account for all these costs while giving yourself enough rope for any unexpected bills or problems that could arise.

 

Lender’s Mortgage Insurance is available if you struggle to reach 20% deposit

While it’s always advisable to save a 20% deposit for your mortgage, there are alternatives if you can’t manage to do so. Lenders can still approve your loan if you have less than the required deposit but most likely you’ll be required to pay lenders mortgage insurance (LMI). LMI allows borrowers to access up to 95% of funding for their home while ensuring that lenders are covered in the case of future defaults. 

This may sound enticing but keep in mind that accessing LMI can cost borrowers a lot more in the long run. This is due to the cost of the insurance and the fact you can also be charged a higher home loan rate. On the positive side, LMI costs can simply be added to the life of your loan and in some cases can even be a better financial decision for the borrower. As such, it’s always important to speak to a third party expert before making any major financial decisions. 

 

Home loan pre-approval lets you house hunt with confidence

Having your lender pre-approve your home is highly advisable for all first home buyers. Pre-approval gives you peace of mind in knowing exactly how much you have to work with, as well as ensuring that any offer you make on a home or at an auction is legitimate. Home loan pre-approval also gives you the ability to act quickly when you are ready to purchase because much of the paperwork that’s required to go ahead with the transaction has already been completed. Just keep in mind that most pre-approvals only last 90 days so it’s essential to keep in contact and up to date with your lender.

 

Be prepared to compromise on location

They say that location is everything, but for many first home buyers, you’ll most likely have to make some compromise on your dream suburb or city. The good news is that if you are willing to move further out of the city or even to a rural location, the bang for buck on your investment can make it highly worthwhile. Suburban or rural properties often come with much more space than what’s available closer to the city and with remote work arrangements and quality infrastructure becoming more available, the value of these properties are set to continue rising.

 

Don’t base your purchase on aesthetics

Just as you need to be prepared to compromise on location, there are equal dangers in letting emotions get the better of you because you are taken with the aesthetics of a property. The attractiveness of a house can be a big distraction from more important indicators of whether it’s a good buy. Rather than focussing on external features such as a nice paint job, consider the resale value in terms of proximity to services, council rates, price trends, position, structural integrity and the availability of schools and public transport.

 

A building inspection can help you negotiate a purchase price

Paying for a building inspection is required for many reasons. On top of protecting you from any structural, light and pest problems that can lead to headache and thousands of dollars in repairs down the track, it can also help you negotiate on the purchase price.

Sometimes, a little bit of structural wear and tear isn’t actually a major issue and the bargaining power that they allow you during your sale negotiations can more than pay for any repairs that need to be done. Testing appliances such as dishwashers and hot water systems should also be included in your inspection as even appliance problems can be used as a handy bargaining chip.

 

Don’t overextend yourself

It’s human nature to get caught up with the emotion of purchase or to worry that an opportunity won’t come up again leading to hasty decision making. Unfortunately, this type of thinking can often lead to debt, regret and resentment down the track. Being strict with the budget you set yourself is the only way to guarantee that you protect your future self from financial and mental stress. So be firm and do everything you can to avoid overextending on your budget.

 

Speak to an expert

When it comes to purchasing your first home, speaking to an expert is essential for making smart and pragmatic decisions. Purchasing a home is one of life’s biggest financial moves, so the last thing you want is to make a silly mistake that could have been avoided just by speaking to the right person. Financial advisors, mortgage brokers, experienced family members and money experts such as Debt Negotiators are a great place to start. Knowledge is power, so the more advice you can get, the better.

 

Clear any outstanding debts

Before you can start dreaming about purchasing your first home you have to address your outstanding debts. While debt itself isn’t necessarily a roadblock to home-ownership, how it is managed can be. This is why speaking to debt professionals like Debt Negotiators should be the first step in your home buying journey. We’ve helped thousands of Australians plan, manage and pay off their debts so they could work towards their dream of owning a home!

If you’re worried that debt might get in the way of owning your first home, contact our friendly team for a chat about your options, today!