The Ultimate First Home Buyer’s Knowledge Toolkit

Moving into your very first home is an exciting time - but it can also be full of complicated jargon, inspections, paperwork, and hair-pulling moments.

Travellers have Lonely Planet, DIYers have Guides for Dummies and your mum probably has the answers to almost everything else - but, where do you learn everything you need to know about buying your first home?

We've put together this ultimate first home buyer knowledge tool kit to make things a little simpler for you. In this resource, we’ve laid out the steps you’ll need to take to get started on your home-buying journey and mapped out the course to navigate any roadblocks in your path.

If you're looking to buy your first home, you need to:

  • Start saving for your deposit by accessing your finances and creating a budget.
  • Find out more about how home loans work and the different types of home loans.
  • Understand that the home-buying process takes a bit of planning and saving, but it's well worth it.
  • Stay informed about every step - this gives you the best chance of getting it right - the first time.

You’ll also need to work out your buying capacity and learn about applying for home loans. At some stage you'll need to look for a property.

Each step comes with unique considerations you need to be prepared for, so keep reading to find out everything you need to know:

Organising your budget

Buying your first home is a major purchase, so it's vital to get your budget in order and save. We’re not saying you can’t have avocado on toast but you may need to consider where you can make sacrifices like not upgrading your smartphone, downgrading on subscription services or skipping out on festival tickets, amongst other things. Getting organised with a budget isn't really about depriving yourself or missing out on things. It's about taking control back and getting your money busy working where it's most important - towards your life goals, like buying a house.

Start by reviewing your current situation

If you're planning to buy your first home, you're probably renting right now. Like other aspiring homeowners, you can save for a deposit while paying your bills and rent provided you stick to a budget. We know, budgeting is peak “adulting”, but before you give up at the thought of maintaining a boring budget, keep in mind your budget is designed to serve your goals. It helps you track what's happening with your cash, so you can make smarter saving and spending decisions for the longer term.
If you take full ownership of your money by keeping up with a budget, you could avoid impulse spending, regrettable purchases, and wasting your money. So think of it this way: your budget is about empowering you - to hit your bigger life goals.

  • Where do you stand Start by understanding where you stand financially. What are you paying in rent, utilities, bills, and other expenses now?
    How much do you want to save?
  • Work to a budgetUse a budget to understand what's coming in and going out. Work out how much you can save. Assess your debts. Consolidate them if it helps you pay them off more quickly.
  • Minimise your rentFind ways to pay as little rent as possible. Split costs with housemates, switch to a smaller place, or move to a cheaper area. You could also save more by finding a second source of income or moving back home for a while.
  • Stay disciplinedWhether it's clothes or gadgets, be aware of your temptations, and stay disciplined. Stay focused on the bigger picture - your deposit and new home - when you're tempted to spend.

Budgeting with calculators

Use a template or budget planner to help with your budgeting. These great tools are designed to help you understand your income, expenses, and possible savings. They make it easy to see at a glance what's happening to your money.

All you have to do is fill out the template in as much detail as possible, and the template will give you an overview of your total income, expenses, and surplus (savings). With the Loan Market budget planner, you can email the information directly to a mortgage broker or print it out. Your broker can then use this data to help you meet your home loan goals.

Your saving game plan for your deposit

Saving up for a deposit is the first, crucial step in securing your first home. It could take years to do and you'll need a game plan to achieve your savings goal. Your deposit will likely be at least 20% of the purchase price. Saving your deposit could seem intimidating or even impossible, but keep in mind the power of regular savings over time. The power of regular savings means you could shorten the time to your deposit simply by putting aside an extra few dollars every day.

  • BudgetWith a clear budget, you'll be able to find out how much you're spending and plan how much to save.
  • Mortgage calculatorUse our mortgage calculator to work out how much your mortgage repayments would be and how much you could borrow. Consider your credit score and how this could affect your borrowing power.
  • Savings accountOpen a dedicated high-interest savings account for your deposit. Automate transfers so the savings component is taken out of your pay.
  • Property marketYou'll also want to keep up with the property market so you can make an informed purchase decision.

Other strategies to look at as you save for your deposit include switching to just one car for your household and cutting down on rental costs.

Read more about developing an effective game plan in our guide to saving up for home deposits.

Doing the numbers for your purchase

So your savings strategy is central to buying your first home. You can use a savings planner calculator that lets you to work out how much you'll save over time. By filling in information like initial deposit, regular deposit, and interest rate, you can work out how much you'll have at the end of six months or a year. You can adjust the amounts to accelerate your savings or slow them down. Doing basic savings modelling like this not only assists with planning; it could help you stay motivated by showing you exactly how you could make your dream home a reality.

Working out how much you have

At some stage, you'll need to sit down and work out the numbers. Use Loan Market's online calculators to work out things like borrowing power and loan repayments. These give you the basic numbers for a good start, but make sure you chat with a mortgage expert to get the exact figures.

Working out your borrowing power is crucial as you shop for a property, and knowing how much you'll need to repay is also vital. You'll also want to find out how much stamp duty you'll pay, along with the fees applicable, which includes conveyancing, building inspection reports, and so on. Again, working out the numbers allows you to take ownership of your dream of own your own home and turn it into an achievable goal.

Find out more about the nitty gritty on financing your first-home purchase in our number crunch guide.

Accelerating your purchase: The Bank of Mum & Dad

Help from your family could accelerate your first home purchase, so why not share your plans so you can enlist Dad, Mum, or other family members to support your goal? Your family members might be more than happy to help out. More importantly, giving your home-ownership goal a little boost might not cost them anything extra if gifted in lieu of presents. For example, instead of birthday presents, ask family and friends to contribute to your house deposit fund. If you're getting married soon, encourage monetary gifts to your house deposit fund and forgo the gift registry.

Other ways to have family members help include acting as your guarantor on a home loan. They could use the equity in property they own to guarantee your loan.

Read more about how to get help from family in our guide.

The home loan process

So you've worked out how the financial side is going to happen. What about securing the right home loan? The home loan process can feel complex at times, so we've broken it down into easy steps and set out answers to the biggest, most frequently asked questions.

Quick overview of the home loan process

Home loans come in different shapes and sizes. While it can seem confusing, the variety of options is a plus for home buyers like you as it means you could find a loan that closely matches your needs and goals.

Goals

Your home loan process likely starts with a chat with your mortgage broker about your goals, financial position, and borrowing power.

Options

After your initial chat, you'll probably hear back from your broker about the types of loan options available. You can pick an option and get started on preparing your loan application.

Conditional-approval

If all goes well, your lender gives you a conditional approval. This is an indication about how much you can offer for a property.

Unconditional approval

At this stage, your lender gives you formal approval and will confirm on that basis.

Types of property to consider

Home loans come in different shapes and sizes. While it can seem confusing, the variety of options is a plus for home buyers like you as it means you could find a loan that closely matches your needs and goals.

Existing properties

Traditionally, home buyers may begin by looking at existing homes or properties in the hopes that they’ll find one that ticks all their boxes. In this case, you’ll need to look at listings online and register for open houses.

  • Preliminary researchBegin by creating a wish list of what you want in a home and note which features are non-negotiable, such as solar access, thermal comfort or transport requirements. Thinking about your current space and what works well or doesn’t is a good place to start. Choose a suburb or locality and compile a list of homes that best meet your list and start the inspection process.
  • InspectionsGet an idea of the space, layout and property structure by inspecting the existing home. Keep an eye out for hidden structural flaws and expensive defects that could end up costing you to fix in the long term. Remember, sometimes an apparent bargain can be difficult or expensive to renovate. Make sure you conduct a complex assessment and weigh up all the possible factors of upgrading or retrofitting.
  • Pre-purchase evaluationConsider enlisting the professional expertise of a designer or builder to conduct a pre-purchase evaluation. In this assessment, they can help you identify the home’s potential as well as expose potential problems. This upfront advice could save you expense and frustration in the future.

Apart from existing properties, there are two other key types of properties to consider are off-the-plan properties and house-and-land packages.

Off-the-plan properties

When you buy off the plan, you rely on advertisements, models, and plan for an idea of the property. This is because the property hasn't been constructed yet. Off the plan could mean you lock in lower prices during a rising property market. However, you need to be aware of the risks and check the contract properly. On the downside, you could be paying more as property prices may have fallen during the time frame you have been under contract.

House-and-land packages

Buying a house-and-land package could allow you to add features and choose your own design. However, be aware of risks such as cash-flow issues during construction and fluctuating prices of building houses.

Find out more about the pros and cons of off-the-plan properties and house-and-land packages in our guide, the buyer’s blueprint.

Let’s work out how much you’ll need to borrow.

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Different types of home loans: what are they?

Home loans can differ considerably, and choosing the right type could mean a better match for your requirements. You can have variable or fixed rate, split loans, packaged loans, and low-doc loans. Other loan types include bridging, introductory rate, and line of credit. Don't worry if it sounds complex as your broker can help explain what it all means in layperson's terms. You can also find out more about these types of home loans in our cheat sheet to loan types.

What's your borrowing capacity?

One of the most important numbers to keep in mind in all this is your borrowing capacity. This is how much you can borrow. A borrowing power calculator like Loan Market's gives you a general estimate of how much you might be able to borrow. This is helpful for planning purposes. You can work out your repayments as well, and find out how long it will take to pay off your mortgage.

Getting advice and doing research

As a first-time home buyer, the process could seem overwhelming but remember you're not doing it alone; advisers are there to help you. Talking to an expert like a Loan Market mortgage broker could be helpful for finding out the right type of loan for you. He or she can guide you through the application process. At the same time, you'll want to do your own research so you make smart decisions about loan products, the type of property, and things like budgeting.

When you're new to the home loan process, the amount of information can be daunting. To keep it simple at the start, explore the big questions. Our guide, Q and A: Your Big Questions Answered, is a great place to start. In it you can find answers to common questions like how much deposit you need, the lifespan of a mortgage, and how interest is worked out.

How lenders assess your home loan application

Before you get the all-clear to go ahead and start shopping around, the lender needs to assess your application. The lenders you approach will likely consider things like purpose, amount, duration, repayment, and risk. Since lenders are bound by law to make responsible lending decisions, they aren't supposed to approve if they think the risk is too high. Lenders take into consideration a wide range of factors to gauge your creditworthiness.

Getting your first home

If you've saved up your deposit, congratulations on hitting a major milestone (and don’t forget to celebrate)! As you plan your purchase, every dollar helps and you could be eligible for the First Home Owner Grant (FHOG). You'll also want to avoid some of the most common mistakes and consider options like buying your first home as an investment.

Here’s the lowdown:

The First Home Owner Grant

You might have forgotten about it, but, yes, you could get help from the government if you’re buying your first home. You could be eligible for the First Home Owner Grant (FHOG). This grant could help pay thousands of dollars towards the cost of your first home. The FHOG is administered by state or territory and terms and criteria differ from state to state. Eligibility criteria include factors like age, permanent-resident status, and home value.

Want to know more? You can find out all the details you need about the FHOG across Australia in our simple guide to the First Home Owner Grant.

Essential things to know before buying your first home

Buying your first home is a major undertaking, and it can feel like you're taking a big step in the dark. Working with a Loan Market mortgage broker is highly recommended as he or she could guide you through the process.

Another useful tip is to save as much of a deposit as possible. Finally, do as much research as you can on the property you’re buying and get independent advice from experts.

Read more about the essential strategies to aid you, with our three useful tips when buying your first home article. And, get the details on what not to do in our guide, six mistakes to avoid when buying your first home.

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Look for a home to buy

Now you're getting to the fun part: looking for that dream first home! At this stage you've probably got  some form of approval or at least you’ll have an idea of how much you'll be able to borrow. You can start looking for homes within your budget. Keep in mind you won't necessarily have to spend the full amount you borrow. You could start by shortlisting the neighbourhoods you'd like to live in.

Take into account factors like commute times, setting (urban, suburban, regional or rural), and amenities. Look online, get help from a real estate agent, and sign up for email notifications for when suitable properties come on the market. Create a list of properties you'd like to inspect, and set aside time on weekends to do thorough inspections.

Buying your first home as an investment

Let's pause here a moment and consider other strategies you could be taking to accelerate your time frame to first home ownership. Rentvesting, for example, is a novel pathway to buying a house. Rentvesting is buying your first home as an investment while living in your current rental property. So why rentvesting, you ask? Rentvesting could offer the best of both worlds: you get to live in a property or suburb you prefer while getting on the property ladder. For example, you might enjoy living in an upmarket area where properties are beyond your budget. It could allow  you to get into the property market quicker.

To find out more about buying your first property, read our guide - Rentvesting: purchasing your first property as an investment property.

Understanding the buying process

So you found a great property in your favourite area and it's within your budget. What's next? What are the steps you should take to maximise your chances of securing that fantastic property you have your eye on - ideally before someone else buys it first? At some stage you'll be making an offer on a property. As mentioned above, ideally this will be after you've been following the property market for some time, gotten approval for your home loan, and done your research. You'll have put in a lot of thought about the type of property you're looking for. You'll have done the checks on the property you have your eye on and inspected it. Some buyers prefer to bypass the auction process entirely, or the seller might have chosen to skip the auction.

Keep in mind the asking price quoted may typically be higher than the price the seller is willing to accept. Know your upper and lower limits when it comes to your offer price. Start with a slightly lower price than your upper limit. This approach gives you some leeway for negotiation. Try to find out things like why the vendor's selling, whether they're after a quick sale, and how long the property's been on the market. You can usually expect vendors to give an answer to your offer within 48 hours.

If the seller is open to negotiating, set goals before you enter negotiations so you know what you want for terms, budget, and price. Avoid being emotional about the property and be prepared to walk away.

To find out more about auctions and negotiation when buying a property, check out our guide - Buying your first home: The art of making an offer and negotiating.

Sold! Now what?

So you’ve made it all the way from your tentative first steps into the property market to this: you've successfully bought your very first home - celebrate a job well done! The post-auction or post-sales stage involves a few things to do to ensure your purchase is completely legit. These can vary depending on your state or territory. It's important to get advice and check in with your lawyer if you're unsure.

Understanding the post-auction process

So, buying property comes with a few legal requirements you should be aware of, and - no surprise there - given a house is one of the biggest purchases you’ll ever make. Here are a few things to keep in mind just to make sure your sale is all good and legit, legally speaking. If you purchased at auction, no cooling-off period applies, so there's no changing your mind. The following steps could apply whether you bought at auction or through private sale:

  • Sign contractUsually you'll need to sign the contract and pay a deposit. The deposit will usually be held in trust until settlement.
  • ChecksYour solicitor or conveyancer will carry out legal checks for the property. Then they contact the seller's lawyer to confirm the settlement date, which is when you pay the rest of the price.
  • Unconditional approvalYour lender values the property and gives you unconditional  approval.
  • Mortgage contractYour lender sends you an offer letter and a contract to sign.
  • SettlementYou conduct a final inspection the week before or on settlement day. At settlement, you exchange more paperwork and you make the final payment. After settlement, you can pick up your keys from the real estate agent and start moving in.

The Checklist: Things to do before moving in

Moving day is here at last, and the satisfaction of being settled into your very own first home can't come quickly enough. There's a few things to take care of before you can sink into your favourite couch in that cosy corner of the house - namely the logistics of moving everything in! Moving in can be a hectic time, so don’t neglect to plan ahead. Check these things off your list in the months and weeks before moving in.

  • Internet and utilitiesBefore moving in, have your internet connected and make sure your utilities accounts (gas, electricity, and water) are set up.
  • Update addressesUpdate your addresses with companies and providers, and let friends and family know.
  • InsuranceMake sure your home and contents insurance is arranged before moving in.
  • Spare keysGet spare keys cut for every household member.
  • RemovalistRemovalists can be booked out week ahead of time, so book early, as soon as you know your move-in date.

Packing and moving tips to minimise stress

You probably aren't looking forward to the tedium and stress of packing everything up and moving, but that’s likely more common than not. Moving can be stressful, but if you plan it right, it could go smoothly. Check out these strategies to minimise the stress.

  • Un-packing boxPack a master un-packing box for packing day. Include essentials like allen keys, tools you need for moving and setting up furniture, ziplock bags for furniture screws, tape, scissors, and other essential items.
  • First-night boxA first-night box is also handy to have. This box contains changes of clothing along with essentials like tea bags, toiletries, linen, and pyjamas.
  • LabelsUse labels on everything so you can quickly locate items without having to open and retape every box. Identify the room the box belongs to as this makes it easier for your removalist - and you when you're unpacking.
  • Children and petsKnow what you'll be doing with children and pets. It's a good idea to hire a babysitter for the day. Keep children entertained on moving day with puzzles, books, and games. Make sure pets are kept out of the way, with access to water. If you're locking pets in a room for the day, don’t forget to schedule toilet breaks.

Planning your mortgage repayments

So you’ve moved into your first home and you’re now a bonafide homeowner. Well done! Even as you deservedly bask in the comfort of your own place, remember you’ll need to keep up with your mortgage repayments in order to keep your place. Just as you budgeted to save for your deposit, you'll want to keep budgeting so you can successfully meet your repayment obligations. Calculators make it easy to work out the details of your repayments especially if you decide to make extra repayments. Use Loan Market's calculators to check and plan your mortgage repayments in advance. You can also use our calculators to find out how much of your repayments go towards reducing the principal and how much is interest payable on your home loan.

If you plan to make extra repayments, check out this tool to work out how lump sums would affect your mortgage, or this tool for how extra repayments would change things.

You can access all of our calculators by clicking here.

Conclusion

The journey to first home ownership can appear to be a challenging one, but rest assured you can achieve it if you set goals and work to a budget. After all, countless others have successfully navigated the path to first time home ownership. Becoming a first-time homeowner is a major achievement usually involving years of planning and saving. Start budgeting to save up for your deposit, and understand the different types of home loans so you can make the right choice. As you get ready to buy your home, you'll want to learn more about the auction and private-sale processes so you can negotiate smart. Once you've secured your dream home, maintain your budget and plan your repayments. Plan right, start now, and you’ll be able to achieve it.

Becoming a homeowner means you need to stay informed, and you can find valuable information on the Loan Market website to help you along the way. Loan Market is a 100% Aussie family owned business and we can help you as a first home buyer access a loan based on your personal situation. Check out the useful tools and guides on our website or contact us today.

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