Buying Your First Home

First home buyers opening door to new home
Updated: April 3, 2024
First Published: April 3, 2024

For many people, buying their first home is an exciting and memorable experience. It represents a significant milestone in life, often marking a transition to greater independence and stability.

Where to Start if You Want to Buy a Property

Knowing what you can afford is a vital first step in your journey towards buying your first home.

Before you even start looking for that dream home, sit down and carefully work through your finances to work out what your buying budget will be. It is also a good idea to speak to your bank or broker about how much you could borrow from a lender.

When thinking about your budget, you should consider your personal circumstances, as well as others outside of your control, like current interest rates and property prices, which will change over time. 

What Is On Your Property Wish List?

The ‘perfect’ property is hard to find, so chances are you’ll have to make some compromises. A helpful exercise to do before you start looking is to work out exactly what you must have in your new home and what you’re prepared to do without.

Some important considerations might be access to public transport and schools, proximity to your workplace or extended family. Maybe you want access to certain restaurants or entertainment districts? Or is a backyard a must-have for you?

How Much Deposit Do You Need To Buy Your First Home?

In many cases, lenders require a minimum deposit of around 5% to 20% of the purchase price of the home. This means if you’re buying a house that costs $300,000, you may need a deposit of $15,000 to $60,000.

If your deposit is less than 20% of the purchase price, you may be required to pay Lender’s Mortgage Insurance (LMI). This insurance protects the lender in case you default on the loan. The cost of LMI can vary depending on factors such as the loan amount and the LMI provider.

Another option is the ‘family guarantee’. This is where a close relative uses the equity they have in their property to provide security for your loan.

The amount guaranteed is calculated on the percentage of the preferred 20% deposit you have saved, meaning the smaller the deposit, the greater the relative has to guarantee.

One advantage of this option is that once you have paid back enough of the loan to cover the deposit shortfall, the family member’s guarantee will usually be released.

While these options may not suit every situation, low-deposit loans do make sense in fast rising markets where waiting to save the required 20% deposit would mean spending more in the long run.

It’s important to speak with mortgage lenders or brokers to get an accurate understanding of the deposit requirements for your specific situation. They can provide you with personalised advice based on your credit history, income, and the type of property you’re looking to purchase.

Common Mistakes To Avoid

Buying a house is a significant financial and emotional decision, and it’s important to approach the process carefully to avoid common mistakes. Here are some common pitfalls to watch out for:

  1. Not Getting Pre-Approved for a Mortgage: Some buyers make the mistake of not getting pre-approved for a mortgage before starting their home search. Pre-approval gives you a clear understanding of how much you can afford to spend. It also strengthens your position as a serious buyer.
  2. Skipping Home Inspections: We always recommend buyers obtain a building and pest inspection. For a unit or townhouse, it is important to also inspect the strata records for the property. Inspections can uncover hidden issues with the property, such as structural problems that may not be visible during a walkthrough.
  3. Ignoring Your Budget: Falling in love with a house that’s outside of your budget can lead to financial stress and strain your finances in the long run. It’s important to stick to your budget and only consider properties that you can comfortably afford.
  4. Not Researching the Neighborhood: The neighborhood you choose can have a significant impact on your quality of life. Take the time to research factors such as crime rates, school districts, and future development plans before making a decision.
  5. Rushing the Process: Buying a house is a major decision that shouldn’t be rushed. Take the time to thoroughly research properties and consider your options before making an offer.
  6. Neglecting to Negotiate: Some buyers make the mistake of accepting the asking price without attempting to negotiate. Sellers may be willing to negotiate on price or other terms. It’s worth exploring your options to get the best deal possible.
  7. Not Getting Everything in Writing: Verbal agreements are not legally binding when it comes to real estate transactions. Make sure to get everything in writing, including contract terms, and any agreements made with the seller. We can help you with this part of the process. 
  8. Forgetting About Future Needs: Consider your future needs and lifestyle changes when choosing a property. Will the property accommodate your long-term goals, such as starting a family or working from home?
  9. Not Getting Legal Advice: Navigating the legal process of buying a home can be overwhelming for a first home buyer. It is important you obtain good legal advice from the start of your journey. Our website is a good source of information to start you off.

By avoiding these common mistakes, you increase your chances of finding the right property and making a sound investment.

Find Out More About Buying Your First Home

We offer a free 15 minute consultation for first home buyers. Just reach out and let us know how we can help!

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This article is intended to be general information only and is not legal advice. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article. The content is current at the date of publication.
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