Buying your first home is exciting! You have (probably) been savings for a fair while and now you are thinking the time might be right?

We see this a lot. At some point you feel secure about your income / employment and your expenses are under control, you probably even find yourself browsing the real estate pages or attending open homes. This has been a goal you have worked towards and perhaps now is the time to take the plunge.

Questions that we often get at this point are:

  • What are the steps in the buying process?
  • Where do I go from here / What is my next step?
  • What First Home benefits are available for me?
  • Do I have enough deposit?
  • What loan amount can I afford? (and what will the repayments be?)
  • Do I need to build a credit rating?
  • Do I go to a bank or use a broker?
  • Who do I talk to for help with the contract?
  • How do I find the right home for me?

We also came up with a series of questions -seperate from the above- that might help you with your first home purchase, see here.

So, we thought it might be helpful to put the answers to these question in a page. A simple guide for you, a way to navigate your first home buyer journey. You can jump ahead to the section you are interested in or read this from start to finish.

We hope this page will help answer your questions and give you the confidence to reach out if you need more. We have broken the above questions up in segments, see links below:

Couple checking finances

What are the steps in the buying process?

There are actually two processes happening simultaneously. The property (buying) process and the finance process. They interact but have different milestones. We did a full description of the two processes and how they need to “line up” on a seperate page, see here.

Here, we will just mention the simplified version. There are the following steps:

  1. Finance application -> pre approval (you are now ready to make offers or bid at an auction*)
  2. Make an offer on a property / register for an auction
  3. Offer accepted / pay holding deposit (At this point your cooling off period starts)
  4. Formal / unconditional finance approval
  5. Exchange / commit to purchase (now you need to pay the 5% or 10% deposit)
  6. Settlement (here the title deed transfers to you and you become a home owner

* -Legal disclaimer- Be aware that the auction process always has an element of risk attached. The complexity is a bit more than this space allows so talk to us to get the details. Be fully informed.

Where do I go from here / What is the next step?

A good starting point is checking what loan amount you can afford and are comfortable with. And that means talking to a broker or a bank*. They are qualified to help you work out what is possible for you. There are significant differences between a bank and a broker and we cover that a bit further on. For now, I will just mention the basic of a finance application. They are quite simple, a bank (or lender) wants to see 3 things:

  1. Do you have some money to put towards the purchase yourself? (this is your savings or equity)
  2. Do you have (stable / reliable) income to make mortgage repayments? (Affordability)
  3. Is your credit history good?

If there is a “yes” for all three of these questions, you will probably find a lender who can help. Of course, this is only the starting point and a lot more needs to be done to be ready. I’m only pointing out the basic principals of mortgage lending. I will cover the rest further on.

* Yes, there are online “affordability calculators” as well. But most of these are marketing tools designed for you to like the webpage / lender and make an enquiry. Also keep in mind that these tools provide just one opinion and won’t show you what is possible with all other banks/lenders.

Some of the benefits you can expect from working with MFS:

  • Unbiased finance advice: We are not tied to any lender of bank. Our only objective is to help you achieve your property goals. Find out what matters to you and what your situation is. Then we research and present your options. You decide what is best. It is as simple as that. No lender preference.
  • Access to all the latest First Home Benefits and information: There are 5 Home Buyer benefits available (some State, some Federal). The rules for eligibility constantly change so if you are a First Home Buyer, it is important to know what you are entitled to. We help you navigate the different benefits and how to apply.
  • Access to all the current lender specials: Yes, lender will create specials to attract new customers. This can come in the form of a rebate, a lower rate or a reduction in mortgage insurance. These offers are often valid for a certain time period only and can be conditional.
  • A strategy to get in front of other buyers and a “how to snap up a property before auction”: How would you like to find out what properties are coming onto the market before they’re listed? The advantage of knowing early and being able to make an offer before anybody else or do a private viewing can not be overstated! We can help you get to that front of the queue.
  • The “4 ways to get your deposit together” info sheet
  • The “3 steps to save $150k or more on your mortgage” info sheet
  • 20 years experience in helping First Home Buyers

What First Home Benefits are available?

To make it easier for first home buyers to buy, the government has create a number of benefits. Below I have listed the most common ones.

  1. The First Home Owners Grant (first introduced on 1 July 2000 to offset the impact of the GST) is the most well known benefit. A national scheme but administered and funded by the states, it provides a one of $10,000 payment to eligible first home buyers. There are several criteria that need to be met to qualify. Some of the criteria are:
      1. You or your partner must not have previously owned a home
      2. The grant is only available for new homes
      3. The maximum purchase price of the property is $750k

For more (and the latest) information, check out the website.

2. The exemption of stamp duty (full or partial) is next. Also called the “First Home Buyer Assistance Scheme”. This allows first home buyers to get into the market without paying stamp duty or paying a reduced amount. The official government website is here but a great place to work out what stamp duty you need to pay is here.

Stamp duty is one of the main cost when buying a property so this benefit can make a big difference in how much deposit you need. For example:

    • A $550k purchase attracts $19,957 in stamp duty but $0 if you are eligible for the FHBAS
    • A $750k purchase attracts $28,957 in stamp duty but that is reduced to $20,804 if you are eligible for the FHBAS

3. The First Home loan Deposit Scheme is a federal government initiative to support eligible first home buyers purchase their first home sooner. The scheme provides a guarantee for First Home Buyers which means no mortgage insurance is payable.

The scheme has 10,000 places for the 2022 financial year. Some of these places are allocated for new homes and some for existing homes. Also, the scheme is only available via participating banks and lenders. More information on places and qualification can be found here.

4. First home super saver scheme (FHSS) scheme allows you to save money for your first home inside your super fund. This will help first home buyers save faster with the concessional tax treatment of superannuation. introduced by the federal government in 2017 to reduce pressure on housing affordability. Full details on the government website here. From 1 July 2018 you can apply to release your voluntary contributions, along with associated earnings, to help you purchase your first home.

Do I have enough deposit?

The banks (and the media) often talk about a 20% deposit. Which, on a $800,000 purchase is $160,000… However, the reality is we see many people with a much smaller deposit come to us looking to buy a first home and that still works! Usually the minimum you need is about 5% (as genuine savings*). So on a $800,000 purchase that is only $40,000. A little easier to manage!

But that is the simplified version. Where it gets tricky is there are possibly other costs like stamp duty, LMI and solicitor fees that need to be covered. Here is an indication what these can add to your cost:

  • Stamp duty is about 3% of the purchase price. So on a $800,000 purchase about $24,000. You might be exempt (in full or partial) from stamp duty but there are criteria. Here is a great place to check.
  • Lender Morgage Insurance (LMI) is a risk fee lenders charge if the loan is over 80% LVR. The cost depends on actual loan amount and the LVR and can easily be $5,000 or more. It is harder to avoid but there is a government program call the First Home Loan Deposit Scheme which can cover this.
  • Solicitor fees. To buy a property in Australia, you need a solicitor or conveyancer. This person checks the contract, does the title searches and arranges settlement with the vendor. An average fee is between $1,200 and $2,000

Those are the major cost. We normally advice to keep some savings aside as emergency funds and allow for moving, rates and insurance. So whilst the minimum is about 5%, a realistic figure is about 8% or even 10%.**

Some lenders accept less than 5%

Where do these funds need to come from? Not all funds (or in all circumstances) need to come from savings. They can also come from:

  1. A Gift. If a family member or other person provides the deposit, it can be accepted as long as it is a “non refundable gift”.
  2. Via a Guarantor. A guarantor is a person who is offering equity from their property as additional security for the loan. Read more here.

* Genuine savings are funds you have accumulated over time. The banks can accept funds as genuine if they can see the money in your account over a 3 months period. It is fine to have the amount required by the end of that 3 months if you have been adding regularly.

** There are a few lenders who will accept less than a 5% deposit or a deposit from “non genuine savings”. For more information on this, get in touch with us.

What loan amount can I afford?

Do I need to build up a good credit rating?

Do I go to a bank or a broker?

Some people prefer to go to the bank they have their everyday banking with.

Who do I talk to for help with the contract

How do I find the right home