HOME LOANS: TOP 10 TIPS FOR BUYING YOUR FIRST HOME

1. DEPOSIT

As a rule of thumb, you will want at least a 5% deposit, plus a little more for costs.
This deposit will need to have been saved up or held for more than 3 months to be considered genuine.
With less than 20% deposit, mortgage insurance will apply and this is another cost to consider.
Keep an eye out for our mortgage insurance fact sheet, coming soon.

2. INCOME

You’ll need it! The more you have the better and the longer have been receiving it, or will be receiving it, the better.
Different lenders have different rules about certain forms of income such as casual income, overtime, allowances, commissions, bonuses, Centrelink and Child Support.
Be ready to prove your income with payslips, bank statements and income statements from MyGov.

3. EXPENDITURE

Get it under control. In the lead up to applying try and stick to the basics of spending as best you can. Try and avoid using things like Afterpay and ZipPay. Evidence of extensive and frequent gambling can be a red flag for lenders. Overdrawn accounts and poor management of payments are also red flags. Frequent ATM withdrawals, especially the minute you get paid are also a cause for concern. It will be easier if the bank can see what you spend and where, so using EFTPoS as much as possible is a big help.
We recommend setting yourself a budget, directing enough of your pay to spending/bills accounts and the rest being squirrelled away as savings. You’ll be amazed at how a budget can help you get what you want faster.

4. LIABILITIES

The size of your loan and its repayments, the type of loan, the number of times you’ve applied for loans can all affect your ability to get a home loan.
PayDay loans are frowned upon as they are seen as a high risk; lots of applications implies you’ve got a big appetite for credit; lots of loan repayments suggest you could get into trouble quickly.
Our best advice is to have as few debts as possible and as few enquiries as possible on your credit file. What debts you do have should be well conducted. Banks will check and your good and bad conduct is now reported every month to credit agencies.
If you don’t need that credit card, cut it up. Even if you don’t use it, it’s a potential loan repayment that the bank will take into account when assessing your ability to pay off a loan.
And ALWAYS disclose your debts. A bank finding out about debt you didn’t disclose could result in an automatic loan decline.

5. ASSETS

Banks will look to see what you have. A good cash deposit is always really helpful. A car helps, shares or investments are good. They don’t place much stock in furniture. Other things like boats, caravans and motorbikes could be ok, as long as they aren’t all financed….

6. STABILITY

Stable employment (ideally 6 months plus) in your job and industry (2 years is good) is always helpful.

7. COSTS TO CONSIDER

As a first home buyer your stamp duty is waived up to certain levels. Check with us, or check with your conveyancer for details.
Conveyancing costs are generally between $1500 and $2000.
Mortgage Insurance differs from bank to bank and depends on loan amount and the percentage of deposit you have. We’ll be able to give you a good idea as to how much mortgage insurance you would have to pay.
Mortgage Insurance is waived where you have a 20% deposit, a guarantor, or can access the National First Home Deposit Scheme.

8. FIRST HOME GRANTS

Most states have a First Home Owners Grant scheme. In NSW, the government offers a $10,000 grant to first home buyers where they are purchasing a new home or building a new home and will be living in that home for a minimum of 6 months, within the first 12 months of purchasing the home. For eligibility in your state, talk to your conveyancer.

9. USING SUPER

The first home super saving scheme allows you to save for your deposit using your super fund. This is done through making additional superannuation payments (above the Superannuation Guarantee amount), either pre- or post-tax. Just be aware that drawing on this super might affect your tax in the year you draw on it.
More information is available here: https://www.ato.gov.au/individuals/super/withdrawing-and-using-your-super/first-home-super-saver-scheme/

10. GUARANTEES

A guarantee involves a family member (usually parents) offering a mortgage over their property to help support your application for a loan. The guarantee limits the amount the bank can claim back from your family member in the event that something goes wrong (usually 20% of the loan amount).