12 Steps to Christmas – First Home Buying

Welcome to our 12 Steps to Christmas, our guide to advance your financial health by Christmas 2024.

The truth is that it is becoming increasingly harder and harder for First Home Buyers to purchase a home in Australia.

Simplistically, increased house prices (particularly in the last decade) have led directly to an increase in the minimum required deposit to purchase. House prices continue to grow due to high demand and low supply.

Increased home loan interest rates reduce borrowing capacity and repayment affordability, limiting the purchase price range suitable for First Home Buyers in the current residential property market.

As a long standing Mortgage Broking company, we have seen it all and have faced many turning tides with our First Home Buying clients for over 35 years.

There are many different pathways to home ownership, which makes navigating what is actually achievable, quite difficult.

We want to educate as many of our clients as possible, to realistically extend the home ownership dream to more and more of the Bernie Lewis Home Loans family

Your budget

There are two main considerations when determining how much you can borrow:

What will the lender allow you to borrow? The amount a lender will actually allow you to borrow may be very different to what you believe you can actually afford.

What you are comfortable with and confident in repaying back to the lender each month? This is the consideration you should be ultimately focused on to ensure you can comfortably repay the loan that will assist you with buying your first home

Your deposit

The minimum deposit required can range from 2 to 5 percent of the property price, depending on the lender and the type of loan product and what deposit assistance options are available for you. To completely avoid Lender’s Mortgage Insurance, you may be required to contribute 20 percent of the property price.

Furthermore, you will require sufficient funds to cover the government duties and fees associated with the purchase. This can add another 4 to 6 percent to what you will pay for the home.

Some lenders will require you to provide proof of at least 5 percent genuine savings via bank statements. Your aim should be to demonstrate that you have saved your deposit over a minimum period of at least 3 months, and in some cases 6 months.

Government help options

Nowadays Australian First Home Buyers have far greater capacity to purchase residential property with a smaller deposit through a variety of government and family assistance options available.

Government assistance is available for eligible applicants, and deposit support can be obtained through government offerings such as:

Home Guarantee Scheme
First Home Owner Grant
HomeStart (SA)
Stamp Duty Exemptions (available in certain states)

These options are designed to reduce the deposit contribution for a first home buyer to as little as 2 to 5 percent of a property price, with capacity to also avoid paying Lender’s Mortgage Insurance. Purchase price caps do apply, designed to limit first home buyers to affordable properties.

There are also shared equity programs, whereby the government obtain a ownership percentage of your future equity to allow you borrow more up to enter the market at a higher price point.

Family help options

Family assistance has always been a common way for first home buyers to boost their funds for a minimum deposit, particularly for those who rent.

Family members can act as security guarantor by using equity in a property (or a term deposit) to assist their children/sibling with the minimum deposit for their first home.

The guarantee can be limited to a specific amount which helps provide certainty and allows the guarantee security to be released, upon request, when there is sufficient equity in the borrower’s property.

There are clear guidelines to ensure the family guarantor is comfortable taking on responsibility regarding the secured debt and has received appropriate legal advice.

There are a few things to be considered before making this decision:

Guarantor(s) will be signing a legal contract is an agreement to repay the loan if the borrower can’t meet their obligations.
Independent financial and legal advice is recommended/expected to ensure all obligations and liabilities are understood.
A Guarantor(s) can’t be released until there is sufficient or agreed equity available in the borrower’s property.

Your home loan pre-approval

Purchasing your first home is an exciting time and certainly one you’d like to make with confidence. Obtaining your home loan pre-approval will give you both peace of mind and allow you to focus on the exciting part of searching for your first home.

Real Estate agents and vendors may look favourably upon your pre-approval when placing your offer, as it’s a great first step in gaining full home loan finance approval, and reflects your commitment to purchasing your potential home.

So what does a Pre-Approval involve?

Establishing your home loan needs and requirements
Providing evidence of your income, savings, debts and expenses
Assessment of your borrowing capacity and purchase scenarios
Choosing a lender and product suitable for your needs and requirements
Lodgement of your application with the lender that you’ve chosen
The lender’s assessment of your application and pre-approval decision

Your pre-approval is based on the information you’ve provided on your pre-approval home loan application, so it’s important to note that any changes to these circumstances could impact on your pre-approval being formally approved once you’ve found your first home. For example changing jobs, taking out further credit etc.

Get started now!

We are proud to be home to a highly skilled team of mortgage and finance brokers who specialise in first home lending.

Bernie Lewis Home Loans have access to a large and diverse range of lending options, which enables us to provide solutions to all walks of life.

We will also guide you through other important steps in the home buying journey, such as:

choosing a suitable loan product
researching properties to buy
how to bid at auction or structure an offer
meeting settlement and how to pay for the property
your post-settlement loan journey

To chat about your first home goals, simply call 08 8300 8300 or click contact us today.

Important Information

*The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone’s personal situation is different, this article should not be taken as advice. Market commentary is based on recent economist reporting and references can be made available upon request.

Ready to get started?

Enquire about more information today. Start your journey with Bernie Lewis Home Loans by getting in touch with us.