ULTIMATE GUIDE FOR
FIRST HOME BUYERS IN AUSTRALIA
- GETTING STARTED
Can you imagine buying a home without knowing anything about first home mortgage, finance or real estate? It can be pretty daunting to buy your first home when you have no idea how long and meticulous of a process you are about to sink your teeth into.
First Time Home Buyer Where To Start
Need a guide to buying first house? Then you’ve come to the right place.
For first home buyers in NSW, this free online resource will give you some valuable insights into the property market in Australia. Our guide for first time buyers will tackle essential pieces of information on mortgages, deposit, home loan types, and other important issues.
What is a first home buyer?
First off, who is a first time home buyer? For some, it is important to know what is considered a first time home buyer because some government grants (we will get to this later) have certain criteria on who qualifies, e.g., the stamp duty exemption.
Basically, a first home buyer is someone buying a property (i.e., house or flat) who has never owned one in the past and no property to sell. If you’re a first time buyer, this precludes the possibility of you being a homeowner, an investor, or someone who is already mortgaging or re-mortgaging an existing home.
Keep reading to get expert advice on how to apply for a home loan first time buyer like you can use as valuable reference.
What is needed for first time home buyer: Costs of buying a home
Some folks who express interest in buying property are not aware of the many upfront and ongoing costs associated with this kind of purchase other than the mortgage itself.
Below is a list of expenses you can expect to comply with. Each one of these costs will vary depending on the state, territory, and area you want to buy in.
How much deposit for first home buyer?
You may find yourself wondering “as a first home buyer how much deposit do I need?” or “how do I get a first time home buyer loan?”
Typically, borrowers are asked to make a 20% deposit of the property’s purchase price.
However, there is an option for those who can’t make the 20% deposit requirement for their first home mortgage. Some home lenders are happy to accept a 5% of 10% deposit — but there’s a catch.
Lender’s Mortgage Insurance
There is what we call a loan-to-value ratio (LVR) which refers to the amount you borrow relative to your property’s value. If your LVR is higher than 80%, it means you pose a greater risk to the lender.
While it is possible to buy your home for much less and get into the market with only a 5% or 10% deposit of the property’s value, the caveat is that you do have to have to pay insurance to your lender — also known as Lenders Mortgage Insurance (LMI). This additional fee is put in place as a means to protect lenders from risky loans held by borrowers with a very low deposit.
A low deposit option may just be what you need to get your first foot up the property ladder. But keep in mind that having to pay LMI means you will pay bigger monthly payments.
Tips to Help First Home Buyers in NSW Save for a
First Home Mortgage Deposit
As a first home buyer, saving for your first home mortgage deposit is a big commitment and sometimes your cash goal can seem out of reach.
Below are top tips to help you save for a house deposit in Australia and get into your first home quicker.
Draw a line between your savings and your everyday cash
Online savings accounts are better than traditional bank accounts because you can’t use them to make purchases or withdraw cash.
Separating your money this way can help you avoid temptation to dip into your savings. It also makes it harder to get access to it.
Automate your savings
Determine how much of your salary you’d like to set aside for savings. Then, set up a regular transfer of your pay into your savings account. You may even ask your employer to split your salary across your different bank accounts.
Another way to automate your savings is by rounding up your transactions. Some savings accounts or apps, for instance, let you round-up your transactions to the nearest dollar or $5 so when you buy a coffee for $5.85, your round-up setting would divert “change” of the “round-up” straight into your savings account.
These two are easy and automatic methods to automatically put money away. Every little bit helps, and this puts you on an “out of sight, out of mind” mode.
Cut back unnecessary spending
When you go over your bank or credit card statements, you may find things like subscriptions or memberships that you can do away with or will be wiser to cancel.
Consider diverting these expenses to your savings account until you save up enough money for buying first home.
Reduce your bills
There are many ways to reduce your bills. When grocery shopping for example, you can order your groceries online so you can see exactly how much you’re going to spend and have more time to decide what you really need.
You can also reduce your food consumption by planning your meals, buying in-season produce, buying meat in bulk, and cooking dishes that can be easy leftover options.
When reducing your energy bills, try comparing rates from energy suppliers regularly and pay attention to regular plan costs.
And finally, start a savings plan
There is no getting your way around it — a savings plan is a must as a first home buyer wondering how to apply for first time home buyer loan.
A bigger deposit means smaller debt and monthly repayments, so it is crucial that you create a savings plan. You can start by tracking your expenditures and setting a realistic budget so you can stay on top of your finances. This will help you pay all of your expenses and save wherever you can.
What are my options if I don't have a deposit ready?
There really aren’t a lot of ‘no deposit’ type of home loans out there. The ones that do exist have very strict criteria that entails a larger interest rate, having a near-perfect credit score, and a very stable employment history.
Some individuals seek financial help from their home-owning parents and family members by asking them to provide a cash gift to help augment their deposit or to become their guarantor.
How to apply for first time home buyer grants
But what if you don’t have anyone from your family who can help?
Don’t fret. Below are government programs designed to help first home buyers fast track their buying journey. The links below will also help you around how to qualify for first time home buyer programs.
First Home Owners Grant
The First Home Owners Grant (FHOG) is a state-based program that gives free funding for first home buyers whose properties have reached settlement. Some states offer grants up to $15,000 and prioritise those who are undertaking construction of brand new homes.
Each state has their own set of requirements for eligibility. Click here for more information.
First Home Super Savers Scheme
The First Home Loan Deposit Scheme aims to support eligible first home buyers purchase a home sooner by lowering the required deposit to secure a loan.
Once you qualify for the scheme, the National Housing Finance and Investment Corporation (NHFIC) will become your guarantor on up to 15% of your deposit. This is helpful for those with 5% deposit who don’t want to pay Lenders Mortgage Insurance.
Each state has their own set of requirements for eligibility. Click here for more information.
First Home Loan Deposit Scheme
The First Home Loan Deposit Scheme aims to support eligible first home buyers purchase a home sooner by lowering the required deposit to secure a loan.
Once you qualify for the scheme, the National Housing Finance and Investment Corporation (NHFIC) will become your guarantor on up to 15% of your deposit. This is helpful for those with 5% deposit who don’t want to pay Lenders Mortgage Insurance.
Each state has their own set of requirements for eligibility. Click here for more information.
Family Home Guarantee
If you’re a single parent with at least one dependent child and looking to purchase a home, the Family Home Guarantee is definitely for you. This scheme will allow you to make a 2% deposit and avoid paying LMI, whether or not you’re a first time home buyer.
Each state has their own set of requirements for eligibility. Click here for more information.
If you need assistance around how to apply for first time home buyer grants, don’t hesitate to reach out to your local home loan mortgage broker.
Buying first home: How to apply for first time home buyer loan
So you’ve decided you want a house you could call your own, and take out a mortgage for it. Now you’re wondering where and how to begin applying for a home loan.
First, you must book an appointment with a trusted home loan expert to advise you of your options based on your situation, goals, and reasons for getting a home loan.
Next, prepare the necessary paperwork (e.g., payslips, bank statements, IDs, etc) for home loan conditional pre-approval. This process of qualification is where your home broker determines how much you can borrow and how best to approach your loan application.
Once you’re approved for a conditional pre-approval, you can begin scouting for your dream home. After finding the property you want, you make a bid to the vendor.
If the sale is a success, your mortgage broker will arrange a property valuation to determine the value of the property.
For more information, read our article on where to start the home loan process.
Getting Your Mortgage: How do I get a first time home buyer loan?
You have completed all the home loan prerequisites — now, you’re ready to begin the full home loan application process.
The next thing you need to do is work on getting unconditional approval, also known as formal approval. This is where home lenders will conclusively determine if you qualify for a loan after having taken all of your personal information into account.
As a first time home buyer how much can I afford?
Your mortgage broker will be able to determine for you how much you can afford based on their assessment of your financial records. They will help you make sure you meet all of the conditions, and will be with you throughout the entire process.
They can even negotiate with the lender on your behalf to help you get the home loan product that best suits your financial situation.
Which home loan for a first home buyer NSW:
fixed, variable, or split?
There are three types of home loans on the market. It is up to you to decide which one can accommodate your lifestyle and financial needs.
The first type is the fixed loan. It is tied to a fixed interest rate and requires you to pay a certain amount for a fixed period of time. This type of loan is great for those who want consistent payments and are averse to interest rate rise.
One major downside to this is that when interest rates do decline, your payment will remain the same and unaffected.
The second type is the variable loan. It is tied to a floating interest rate, which means your monthly repayments may change depending on whether the interest rate increases or declines. This type of loan is great for those who want a higher degree of flexibility in their repayments.
The third type is the split loan where your loan is divided into multiple parts. You can nominate a portion of your loan to be tied to a fixed interest rate, and the remainder could have a variable interest rate. This option is great for those who want to get the features from both variable and fixed rate loans.
To know which one will suit your personal circumstances best, get professional advice from the best mortgage broker in your area
Reasons a First Home Buyer Should Use A
Mortgage Broker NSW
Mortgage brokers NSW provide a valuable service that is often overlooked by first home buyers. They are experts at finding you the best deal on a loan for your needs. They will also help with paperwork and negotiations between lenders and borrowers.
Below are the most important ways a home loan mortgage broker can help ease the process of buying first home for you.
Wide panel of lenders and products
Get access to a wide panel of lenders and can help you compare a range of home loan products to find the one that best suits your needs.
Time-saving
Save time by letting your broker do the research and paperwork for you, which can be especially helpful if you're a first-time home buyer and are unfamiliar with the process.
Expert advice
Be educated by a professional on the different types of loans available, interest rates, and repayment options, helping you make an informed decision.
Negotiating power
Stress less about making sure you get the right deal for your circumstances as your broker can negotiate with lenders on your behalf to help you secure a better interest rate or loan terms.
Simplified application process
Skip the legwork of sorting your paperwork! Allow your broker to help you with filling it out as well as making sure you have all supporting documents prior to your application submission.
Help with credit issues
If you have a poor credit score or other credit issues, a mortgage broker can help you find lenders that are more willing to work with you.
Ongoing support
Mortgage brokers can provide ongoing support throughout the life of your loan, including help with refinancing or negotiating loan modifications.
Peace of mind
Rest assured that your broker will make sure you understand the home loan process and are comfortable with your loan terms, helping you avoid costly mistakes or misunderstandings.
Get support during the settlement process
Your broker will support you through the settlement process (conveyancing, building and pest, and pre-settlement inspections) until the contract is finalised.
Let the mortgage professionals at Stryve help you
The buying experience is a huge learning curve and one of the biggest decisions you’ll make in your life. It can be somewhat a little overwhelming at first. You’re in safe hands with Stryve Finance.
Appointment
Take the first step to organise an appointment with us to discuss your plans to purchase. We will let you know what can be done, what’s involved and the best lenders to help your dream become a reality.
Loan Application
We will let you know what paperwork is required to put together a pre-approval to give you the financial backing to make offers with confidence.
Ongoing Help
We will continue to service our clients long after settlement. From interest rate reviews right through to ongoing loan maintenance. You will always have a point of contact for all future lending
Why Stryve?
We know the in’s and out’s of the finance industry which is why we love helping you secure your first home with a loan that is flexible for you. Buying your first home is tough and we get it. We understand you will have a heap of questions that need answers. Let us help you take the first step in an appointment to discuss the options available for you.
Expert advice from start to finish
Have an expert broker in your corner navigating you through the complexities of getting the right loan for your circumstances.
Getting the toughest loans approved
Banks can be tough, which is why we go the extra mile in getting the loan you deserve.
Your success is our success
Getting the keys to your new property is where it all counts. Time to pop a bottle of champagne!
FAQs on First Home Mortgage
What is a mortgage broker, and how can they help me as a first home buyer?
A mortgage broker is a licensed professional who can help you find and compare home loans from various lenders. They can help you navigate the application process, negotiate with lenders on your behalf, and provide guidance on the best loan options for your situation.
What are the advantages of using a mortgage broker when applying for a first home buyer loan?
Using a first home buyer mortgage broker can offer several advantages, such as access to a wider range of loan products and lenders, expert advice on the application process, and potentially better loan terms and interest rates. They can also save you time and effort by doing the research and paperwork for you.
How do I find a reputable mortgage broker that specialises in home loan for first home buyers in Australia?
You can find a reputable mortgage broker in Australia by asking for referrals from friends and family, checking online reviews and ratings, and verifying their credentials with industry associations such as the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA). They also should have a Certificate IV in Finance and Mortgage Broking. They should also have a credit licence from Australian Securities and Investments Commission (ASIC).
How much can I receive from a first home buyer grant, and what can it be used for?
The amount of first home buyer grant you can receive varies depending on the state or territory in which you are purchasing the property, and can range from several thousand to tens of thousands of dollars. The grant can be used towards the deposit or other associated costs of buying a property.
What is a credit score, and why is it important for a first home buyer?
our credit score is a number that is calculated based on your past credit and loan history, and it reflects your creditworthiness. Lenders use your credit score to assess the level of risk associated with lending you money. Your credit score is calculated based on several factors, including your payment history, credit utilisation, length of credit history, credit mix, and new credit inquiries. Payment history is the most important factor, as it reflects whether you have made payments on time and in full for past loans and credit accounts.
Having a good credit score is important when applying for first home buyer home loans, as it can affect your ability to qualify for a loan and the interest rate you are offered. Lenders may also consider other factors when assessing your loan application, such as your income, employment history, and debt-to-income ratio.
How can I improve my credit score before applying for a first home buyer loan?
You can improve your credit score before applying for first time home buyer loans by paying bills on time, reducing credit card balances, avoiding new credit applications, and correcting any errors on your credit report.
What is the difference between a fixed and variable interest rate for a first home buyer loan?
When you apply for loans for first time home buyers, you will have to choose a type of first home buyer interest rate. A fixed interest rate means that the interest rate and thus your monthly repayments on your first home mortgage will remain the same for the entire term of your loan, regardless of changes in market conditions. A variable interest rate can change over time, based on changes in market conditions, such as fluctuations in the Reserve Bank of Australia’s official cash rate. This means that your monthly repayments can also vary over time.
What are the advantages and disadvantages of fixed vs variable rates for a first time home buyers loan?
Fixed interest rates can provide you with certainty and stability and can make it easier to budget and plan your finances. However, if interest rates fall, you may miss out on potential savings. Variable interest rate can offer more flexibility, as your repayments can decrease if interest rates fall. But if interest rates rise, your repayments may increase, which can make it harder to budget and plan your finances.
Can you really give me access to the best first home buyer loans in the market?
In Australia, mortgage brokers are prohibited from claiming that a particular home loan is “the best” available in the market. This is because the Australian Securities and Investments Commission (ASIC) discourages the use of such language, especially since brokers do not have access to all lenders or products in the country, and thus, there is no concrete evidence to support such a claim.
However, as mortgage brokers, we can assist you in finding the most suitable home loan for your specific needs and circumstances. Our role is to evaluate your financial situation, discuss your goals and preferences, and suggest a variety of options from our network of lenders. Ultimately, the ideal home loan for you is one that caters to your requirements and fits within your budget.
Can I use my superannuation to help save for a first home buyer deposit?
Yes you can use it to help save for a first home loan deposit through the First Home Super Saver (FHSS) Scheme. This government scheme allows eligible first home buyers to withdraw voluntary contributions made to their superannuation fund to put towards their first home deposit. Under the FHSS Scheme, eligible individuals can make voluntary contributions of up to $15,000 per financial year, up to a total of $30,000, into their superannuation account to save for their first home. These voluntary contributions are taxed at a lower rate than your regular income tax rate. Once you are ready to purchase your first home, you can apply to withdraw these contributions, as well as any associated earnings, to put towards your home deposit.
Can I use my rental history as proof of genuine savings when applying for a first home mortgage?
Genuine savings are funds that you have saved over time, typically held in a savings account or investment account, to demonstrate your ability to save and manage your finances. Lenders may accept your rental history as evidence of genuine savings if you can provide documentation to show that you have consistently paid rent on time and in full for a specified period, usually around six to 12 months. This can help demonstrate to the lender that you are capable of meeting regular financial commitments and have a reliable income stream.
Can I get a first home buyer loan without a deposit?
Traditionally, home lenders require borrowers to have a deposit of at least 5% of the property purchase price to be eligible for a home loan (plus Lenders Mortgage Insurance or LMI, 20% if without LMI). One option for borrowers with no deposit is to take out a guarantor loan, where a family member or friend provides a guarantee for the loan by offering their own property as security. This allows the borrower to avoid having to save up for a deposit and may help them secure a first home buyer loan. Another option is to consider applying for a first home buyer grant, which can provide financial assistance to eligible first home buyers in the form of a cash payment or a reduction in stamp duty.
How long does it typically take to save for a first home buyer deposit in Australia?
According to the Domain First Home Buyer Report, the time it takes to save for a first home buyer deposit in Australia varies by location. The report found that, on average, it is now 13 months quicker for a couple aged between 25 and 34 to save a 20% deposit for an entry-level house in Sydney and Canberra than it was last year. In Brisbane, it takes 11 months less, in Melbourne and Darwin nine months less, in Hobart four months less, and in Perth just one month less. However, the report noted that in Adelaide, the time it takes to save for a deposit has actually increased by one month. Overall, the time it takes to save for a deposit can vary depending on location and other factors, but it remains a significant hurdle for many first-home buyers.
Should I be worried about my Afterpay debts when applying for a first home mortgage?
If you have outstanding debts with Afterpay or any other buy now pay later providers, know that this might impact your ability to secure a first home mortgage. Lenders will assess your credit history and current financial situation when determining your eligibility for a home loan. This includes looking at your outstanding debts, your repayment history, and your overall financial stability.
While having Afterpay debts may not necessarily disqualify you from getting a home loan, it could have an impact on your credit score and lenders may view it as a potential risk.It is important to be transparent about your financial situation when applying for a home loan and to work with a mortgage broker or financial advisor who can help you navigate the application process and assess your options. If you are concerned about how your Afterpay debts might impact your ability to secure a first home mortgage, speak with us at Stryve Finance so we can provide guidance and advice specific to your situation.
Should I buy my first home as a single person?
One advantage of buying a home as a single person is that you have full control over the decision-making process and do not need to consider others. You can also potentially take advantage of first home buyer grants or incentives that may not be available to couples or families.
However, buying a home on a single income can be more challenging, as you may have less borrowing power and less capacity to save for a deposit. Additionally, owning a home comes with ongoing expenses and responsibilities, such as maintenance, repairs, and property taxes, which can be difficult to manage on a single income.
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Kristy,
NSW“Being a first home buyer can be a nerve-racking minefield but Dylan Bertovic from Stryve Finance made the whole process feel smooth. He checked-in regularly over a two year period (off the plan purchase) and was confident, clear and friendly in his approach. Dylan was a clear leader when other brokers failed to deliver. He was most definitely the most pleasurable person to deal with compared to everyone else in the experience. Also still managed to get us a very competitive rate considering our extremely tricky situation. He made our dream happen and for that we could not thank or recommend him enough!``
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