Your Guide to Buying
Your First Home 

After renting or living with family, having a home of your own probably sounds like a dream come true. But while you may be ready to make the move to first homeownership, you may not know where to start.

If you’re feeling unsure or overwhelmed, there’s no need to worry. It’s all a lot easier than it seems. To help get you on the right track, here’s your ultimate guide to buying your first home.

Calculating Your Costs

First thing’s first – you need to know what you can afford. When buying a new home, there are upfront and ongoing costs that you need to account for in your budget before you even start looking at potential properties.

Upfront costs  

As you probably know, you’ll need to have a deposit saved up to put towards the purchase of your first home. That doesn’t necessarily mean you need to have $40,000 set aside. These days lenders will accept less than 20% for a deposit and there’s also low deposit and no deposit home loans available.

That being said, it’s always a good idea to save up as much as you can for your first home deposit. If you have less than 20%, you may have to pay a Lender’s Mortgage Insurance (LMI) premium. This will protect the bank in the event you’re unable to pay back your loan.

On top of your deposit, you may also need to pay for stamp duty. This is basically a government tax that applies to the property sale. Depending on the property you purchase, you may be able to have your stamp duty fees waived as a first home buyer.

There’s also loan establishment fees, valuation fees, building inspection fees and other costs that you will need to take into consideration.

Ongoing costs  

Once you have your own home, you’ll need to start making mortgage repayments. Different lenders have different rules, but generally, you’ll need to ensure you pay a certain amount off your home loan each month.

Your budget will also need to account for annual council rates and water rates, and you will need to ensure you set funds aside for any home repairs or upgrades you may need to make.

Lastly, it’s likely you’ll want home and contents insurance to cover you for damage and theft as well as mortgage protection insurance in case you’re unable to pay off your loan for any reason in the future.

How much can I borrow?  

It’s important to know how much you can borrow so that you can start looking at properties in your price range. While you can use calculators online to figure out your borrowing power, it’s always best to chat to a professional. Online calculators make a lot of generalisations, and the amount you can borrow can be impacted by a range of different factors.

Help for First Home Buyers

As you can see, there are a lot of costs associated with owning your own home. But as a first-time homebuyer, there is a range of resources available to you that can help make homeownership more affordable.

First Home Owner Grant  

If you buy or build a new home in WA as a first home buyer, you may be eligible for the First Home Owner Grant. This is a one-off payment of $10,000 that is only offered to first home buyers aged 18 or over. You can apply for the grant through your lender, your mortgage broker or by submitting an application online.

It’s important to note that only one grant can be used per transaction, so if you’re buying a home with your partner and you’re both first homeowners, you’ll only receive one grant of $10,000. If you’re purchasing an established property, it has to be substantially renovated for the grant to apply.

Keystart  

Keystart is a home lender that aims to make homeownership more affordable for everyone, not just first home buyers. They offer low deposit home loans with no LMI and low entry costs to help you get into your own home.

Unlike other lenders, their aim isn’t to keep you as a customer for life. Instead, they call themselves a transitional lender. They want to help you get set up and then they encourage you to refinance with another lender when you’re ready.

Getting Approved for Finance  

After crunching all the numbers, you may be keen to go out and look for your new home. Before you get too excited, it’s a good idea to first get pre-approval. You could go to your bank or a mortgage broker to get pre-approved for a home loan. From there, you’ll be able to put a subject to finance offer on a property.

Bank or broker?  

When you start this entire process, you need to decide whether you’ll go through your bank or a mortgage broker. If you go to your bank, they will take you through the home loan products they offer. If you go to a broker, they will review a wide range of products across many different lenders to find suitable options for you.

You could chat to multiple banks yourself to compare different offers, but a broker can do this for you on a much larger scale, and they won’t charge you a thing to do it.

Types of home loans  

There are many different home loan products available with many different features and benefits. You should always get professional advice to figure out which options are going to be best for your personal situation.

Without getting too far into it, most home loans are structured as either principal and interest or interest-only. This means you either pay off a portion of the total amount you’ve borrowed plus interest, or you just pay the interest for a limited time.

Your interest rate could be fixed for a set term, or it could be a variable rate that is open to fluctuations in line with changes in the market. Some lenders will also offer split rates, where part of your loan is fixed, and the other part is variable.

When you sit down with your bank or broker, they can take you through all of this and recommend what’s going to be best for you.

Going to Home Opens   

You’ve calculated your costs. You’ve got pre-approval. Now you can get to the fun stuff and start going to home opens.

When viewing potential properties, make sure you go in with a clear idea of what you want. It’s worth making a list of what’s non-negotiable versus what would be nice to have and what you’re willing to compromise on.

You should also consider more than just the house itself. Look at the surrounding neighbourhood – take note of how the community feels and what amenities are nearby. The location you’re living in is just as important as the roof over your head.

From Offer to Settlement  

Once you’ve found a property that ticks all the boxes, you can put in your offer and put down a holding deposit. During negotiations, the owner of the property can entertain other offers. If they decide to go with another buyer, your holding deposit will be refunded to you.

If your offer is accepted, you’ll then need to pay the full deposit and sign the contract of sale. Once the paperwork is done, the cooling-off period will start. You should use this time to get a building inspection completed to check the condition of the property. If anything comes out of this inspection that raises a few alarm bells, you may be able to withdraw from the sale and have your deposit refunded.

Next comes the settlement period. The seller will usually determine the settlement period, but you can always negotiate. Most settlements are around 4 to 6 weeks. At this time, your lender will pay off the balance of the property using your home loan and will also pay any stamp duty. You’ll then be handed the keys and get the green light to start moving into your new home.

Get Started With a Mortgage Broker

If you’re looking to buy your first home in Perth, get in touch with our team at Loan Monster today. Our mortgage brokers can walk you through the entire process and answer all your questions. It all comes at no charge to you and there’s no obligation to go ahead, so why not sit down and have a chat with us.

Contact us today and we’ll get back to you in 24 hours, even on the weekends.