Looking to enter the property market for the first time? Here’s what you need to know.
As a first home buyer, the process of looking for your first property can be a little daunting and overwhelming. Especially in today’s market where property prices have skyrocketed, you might feel like you’re getting pushed out of the market and further away from your dream home!
We want you to feel confident going into your home journey! You might have some questions, how much deposit do you really need? What is lenders mortgage insurance? How do you know what your eligibility is for a loan?
Fear not! We’re here to guide you through the process and hopefully leave you feeling a little more confident instead of feeling like you need to understand another language!
First things first, you need to set a realistic budget for your current plus future financial circumstances. It would be worth having a chat with a mortgage broker (or your bank) about your affordability to begin with, the last thing you want to do is waste time looking at properties which are out of your price range!
Keep in mind you will also need to budget for extra expenses on top of your required deposit such as any bank fees, deposit to secure the contract (this could be a few grand but you would need to talk to the sales agent) or conveyancing costs, plus your moving costs!
You can work with a mortgage broker to get your pre-approval all ready to go, then when you finally find the ‘one’ you can take the leap knowing you have everything lined up! This is extremely helpful to speed up the process, especially in a highly competitive market!Pay off any debts! Yes we’re looking at you Afterpay and credit card lovers. The banks will not look favourably on these types of debts (especially Afterpay), so make sure these are paid off prior to your house hunting journey.
Now for the fun part! It’s time to start house hunting! (Yay!). You need to get to know the market, make a list of your non-negotiables and then additions you would prefer but ones that you can also be flexible with. Realistically, you’re not going to find the home that ticks every single box on your list, so be prepared to be a little flexible. It can also help to widen your search when first starting out.
Most importantly, don’t give up! It can be a little disheartening if you miss out on your first couple homes but the right one will come along.
Now to break down some terminologies and FAQ’s!
How much deposit do you really need?
Now, people often hear that a 20% deposit is required, while that may be a bank's preference, it is possible to secure your home with a 5% loan - YES 5%!
What is lenders mortgage insurance?
Lenders Mortgage Insurance or LMI for short is insurance that a lender (you, as the borrower) can take out to insure against the risk of not recovering the outstanding loan balance if you are unable to meet your loan payments and the property is sold for less than the outstanding loan balance.
Do I need to know my borrowing capacity?
Short answer, yes. It is best to know your borrowing capacity. You don’t want to be starting your house hunting journey and looking home way out of budget.
This is likely going to end in you feeling deflated if you find a house you cannot afford.
Now, each time the banks move your interest rates your borrowing capacity is impacted too, so if you haven’t checked this in a little while it’s a good idea to book in with your mortgage broker or bank.
This question is by far, one of our most popular client questions lately and it’s even more important to be on top of in the ever changing rate environment.
To give some more clarity, your borrowing capacity is determined based on a number of factors such as:
Number of dependants
Your current income and employment status
Other income (such as rental income)
Your current bills and expenses
Current loans and other debt (personal loans, car loans, credit cards etc.)
Now, I do have to preface that this can depend on individual circumstances however we can work through and around any hurdles which may come up!
Want to discuss more about your situation? Book in a discovery call here>.
Sarah x
