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.
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.
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 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.