Things You Need to Know as a First Home Buyer

Things You Need to Know as a First Home Buyer

26 April 2024

Buying your first home is one of the most exciting experiences of your life, but it can also be one of the most overwhelming and stressful as well. For most people, it is the first time they will have ever dealt with such a substantial amount of money, and the anxiety that comes with it can be difficult to manage if you aren’t sufficiently prepared. But with the right education and resources, you can make good decisions and avoid the many pitfalls, making it a positive and hugely rewarding experience.

 

Arranging Finance

The first thing you will need to do is to think about how you are going to finance the purchase. The simplest and easiest way to get this process started is to speak to a qualified finance broker. Gone are the days where you would go down to your local bank and book a meeting with the manager to talk about getting a loan, nowadays a finance or mortgage broker can help you access literally dozens of different banks and lenders, and can shop around all of them to see who is willing to offer you the best deal.

Your broker will also be able to calculate how much you can potentially borrow, which will give you a guide on what locations you can afford to buy in. Once you have provided them with all the required information and documentation, and provided you meet the necessary serviceability criteria, they can then set about organising a pre-approval for you – Meaning the loan is approved in principle subject to you finding a suitable property to buy.

To arrange a consultation with a fully qualified finance broker, click here.

Deposit

You will also need to begin thinking about saving a deposit. Traditionally, the banks would want to see savings of around 5-10% of the proposed purchase price to prove to them that you were able to afford the loan repayments, but this will vary from lender to lender. With that being said, in today’s market where both the cost of living and property prices are at historic highs, it is common for first home buyers to seek assistance from their parents or other family members, who may be able to help you with your deposit and provide the bank with a guarantee for the loan.

Ultimately, the bigger the deposit you have the less you have to borrow and the lower your repayments will be, so save hard.

Market Research

While your broker is busy arranging approval for your loan, you will want to do start doing some research on the local market in the areas you are thinking about buying, this will mean jumping on-line to sites such as realestate.com.au and domain.com.au to get a gauge on what is currently available, what has recently sold, and what price different types of property are selling for.

It is important to remember that at this stage, you are still just getting a feel for the market and you should not be seriously thinking about making offers on properties just yet – This can wait until after you have a pre-approval for your finance.

Budget

Once you have a deposit saved and finance pre-approval arranged, it’s time to go shopping. By this stage, you will now have a clear indication of how much you can borrow, and based on this how much you can afford to spend on a property, so it is very important to shop within the parameters of this amount and not over-extend yourself financially. Be particularly wary of extra or hidden costs that often lurk within the home buying process, such as legal costs, bank fees and stamp duty, which for first home buyers in Queensland is incurred on any purchase over and above $500,000. Many first time buyers unfortunately fail to budget for such costs, and you need to be aware of how much this affects your purchasing power to avoid straining yourself financially.

Expectations

Now that you are actively looking at properties for sale, it is crucial that you effectively manage your own personal expectations and shop within your means. Always remember, this is your first home, not your forever home, and as such it does not need to be your dream home. Treat it as a stepping stone to bigger and better things, and be willing to accept that it will not be perfect. You are an entry-level buyer, so accept that you will be buying an entry level home, and focus on finding something in an appealing location. Well located properties tend to appreciate more in value, regardless of how nice the home might be, and building some equity in the property is how you can use it as a springboard to something bigger and better.

Making Offers

When you find something you like and the time comes to submit an offer on a property, it’s crucial to ensure that any offers you make are made in writing. This can be done by either completing and signing an expression of interest form (can be either in hard copy or digital format), or by signing off on a contract of sale which the agent would then present to the owner for their consideration. Verbal offers are not advisable – By all means, communicate with the agent to express your interest in making an offer, but you should always follow this up with an offer in writing so that the owner knows you are a genuine buyer.

For a more detailed look at this topic, click here.

Buying at Auction

If you are looking at properties which are being sold at auction, then you need to ensure that you thoroughly understand the auction process before registering to bid at one. Most importantly, when you buy a house at auction you are forgoing the right to have the benefit of a finance or building inspection clause in your purchase contract, which leaves you without an option to terminate the contract should the bank not approve your finance application or if you find major problems with the house. Additionally, it is normal for buyers to be asked to pay a 10% deposit upon the fall of the hammer, and if you are unable to meet this requirement you may find yourself in hot water if you are the successful bidder.

For a more detailed look at the auction process, click here.

Til next time, ciao 😊

 

Disclaimer: The information is this article is for general information only, it is not intended and should not be considered as either legal or financial advice. The information contained herein should not be relied upon solely and all parties are encouraged to obtain their own independent advice before making any financial decision.
Lee Knutsen

Article by Lee Knutsen

Co-founder & Managing Director of House, Lee Knutsen first entered the real estate industry in 2006 as a residential sales specialist. After more than a decade as a sales agent…

Call 0412 757 981 Email Lee