First home buyers can often be daunted by the home building process. From settlement agents to gaining finance, working out deposit requirements to choosing where to build – there’s certainly a lot to take in and consider.
But don’t forget that buying your first home can also be one of the most thrilling experiences of your life.
So for those in the market for some helpful tips – look no further. We’ve developed a ‘quick guide’ for first home buyers. Here’s Part One of what you need to know before taking the plunge into buying your very first home.
Working out how much can be borrowed
Before you start house hunting, it’s imperative that you establish a budget. To do this you need to speak with an experienced finance consultant who will be able to advise you what budget you can work to.
First home buyers need to do establish a budget which will clarify the cost of monthly mortgage repayments. It is important to ensure that these repayments are comfortably affordable and that enough income remains every month to create a ‘buffer’ for those unexpected costs.
And it goes without saying that once a budget is established, it’s important to stick to it. Once a budget is determined, finding a design (and builder) to suit your budget becomes easier. (Dale Alcock has the Primo Range which is specifically suited for first home buyers)
The First Home Owners Grant
The First Home Owner Grant (FHOG) scheme was introduced over 10 years ago to offset the effect of the GST on home ownership. It is a national scheme funded by the states and territories and administered under their own legislation.
Under the scheme, a one-off grant of up to $7,000 is payable to first home owners that satisfy the eligibility criteria – that means that if you haven’t owned a home before you are very likely to be eligible for the grant.
For more information about the FHOG, you can download this fact sheet.
http://www.dtf.wa.gov.au/cms/uploadedFiles/_State_Revenue/FHOG/FHOG_Fact_Sheet.pdf.
The deposit required
Despite Australia remaining fairly unscathed by the global financial crisis, home buyers continue to experience challenges in the qualification criteria for home loans.
As a result, many banks have increased their requirements when it comes to the deposit required to purchase a home.
Lenders usually now require a minimum 10% deposit and only a handful still offer options with a 5% deposit. On top of this, many also require a large portion of the deposit to come from money that has been regularly saved.
What is meant by ‘regular’ savings?
Regular savings can be demonstrated as a result of ongoing deposits being paid into a bank account which has accumulated over time. This is generally required over a minimum period of between three to six months.
In the past, lenders have been satisfied with a borrowers deposit coming solely from areas such as the First Home Owners Grant, gifts from family or friends or even the sale of other assets, but this is no longer always the case.
The impact of past credit history
Any blemish on a credit report can mean a home loan application will not be considered. For this reason, it’s crucial for first home buyers to understand the impact of not paying a bill on time. Simply overlooking a mobile phone payment of $100 can make the difference between being eligible for a home loan or not.
What alternatives do I have in terms of finance solutions?
Given the cost of housing in WA, shared ownership is starting to re-emerge as a viable option for many first home buyers. A joint venture of this kind can be entered into with a family member – through a family pledge or guarantee – or even with friends.
These guarantees or pledges can be limited so that the family member or friend knows exactly what they are guaranteeing ahead of time.
The good news is that there are a number of lenders that offer a broad selection of products suited to shared home ownership.
Watch this space for Part Two of our ‘Quick Guide for First Home Buyers’. In the meantime, do you have any tips to share with first home buyers? We’d love to hear them.
