The ultimate guide to buying your first home

Buying your first home is one of the most exciting, albeit challenging experiences you’ll ever go through. From pre-approval and negotiating contracts to closing costs and paperwork, the road to home ownership is often a steep learning curve for first-time buyers.

With this in mind, we’ve created our very own ultimate guide on how to buy a house so you can approach the experience with a little more confidence. Check out our tips to help you land a property as a first-time home buyer.

Assessing Your Financial Readiness

Purchasing a property is an expensive exercise, so it’s important to review your finances before you take the plunge. Here are a few key points to consider when it comes to your cash.

Explore your finances

Banks and lenders don’t go handing out loans without having a good hard look at your finances, so it helps to be aware of exactly what they’re looking for. Besides the obvious factors, like income and expenses, your lender will also consider your assets, liabilities and existing commitments to make sure you can comfortably afford to service a potential home loan. 

Check your credit score

Your credit score plays a key role in determining whether or not you make a good candidate for a mortgage. Banks and lenders will use your score to assess your loan application. A good credit score typically indicates that you’re more likely to make your mortgage repayments on time. Ultimately, the higher your score, the better.

With this in mind, it can be worth checking your credit score to see how you’re tracking. Checking your credit score is quick and easy. There are plenty of online platforms, like Credit Savvy and Canstar, that you can use to run a credit check.  

By checking your credit score in advance, you’ll be better positioned to make changes to improve your score ahead of time so you don’t get caught out when it comes time to apply for pre-approval or a home loan.

Set up your savings

It can take years to save up enough money for a home deposit. Even if you’re lucky enough to receive a monetary gift from your parents or family to put towards your down payment, you’ll still have to demonstrate some genuine savings and a history of good money habits.

When it comes to your down payment, most banks and lenders like to see a deposit of at least 20% of the property purchase price. If you’re struggling to save up the whole 20% deposit, you can generally still get away with a smaller deposit, but you’ll often have to pay lender’s mortgage insurance (LMI) or a low deposit premium (LDP) for the privilege. Although these options can be costly, they allow you to get into the property market sooner, so it’s up to you to weigh up your options. 

If you’re still working on saving up enough for a deposit, you might need to spend a bit of time reviewing your income and expenses to help you fast-track your savings, which brings us to our next point, creating a budget. 

Setting a Realistic Budget

When it comes to saving up enough cash for a deposit, you often have to be conscious of your spending and create positive spending habits. That’s where a budget can come in handy. 

Once you know exactly how much you need for a house deposit, you can break this overall savings goal down into smaller, more manageable mini-goals. Be sure to celebrate your achievements along the way to help keep you motivated during your savings journey.

Understanding Mortgage Options

Most first-time buyers and buyers, in general, don’t have enough cash in the bank to pay for a property outright, so chances are you’ll need to apply for a home loan to fund the purchase of your home. With so many different mortgage options out there, it pays to do your research to find a home loan that best suits your needs. Here’s a quick overview of some key elements to consider when it comes to choosing the best mortgage for you.

Owner-occupier vs investment home loans

Some mortgages are only available to certain buyers based on the purpose of their home loan, like whether you plan on living there yourself or whether the property will be used as an investment. Investment loans are often viewed as higher risk than owner-occupier loans, which is why owner-occupier home loans typically offer a lower interest rate. 

Variable rate vs fixed rate home loans

When it comes to choosing a mortgage, you’ll often have the option to decide between a fixed and variable interest rate. While variable interest rates fluctuate based on different factors, fixed interest rates are locked in for a specific amount of time. Variable home loans often offer a number of different loan facilities and features, like offset accounts and redraw facilities.

Alternatively, you might decide to split your loan to take advantage of the benefits that come with both fixed and variable interest rates. 

Interest-only vs principal and interest home loans

Depending on your lender, you might also be able to choose how to repay your home loan. Some lenders offer interest-only home loans, so you’ll only have to cover your interest repayments for a specific period. Others require you to cover principal and interest repayments, which means that you’re also chipping away at the outstanding loan amount that you owe to the bank.

Exploring First-Time Homebuyer Programs and Grants

For many first-time buyers, getting into the property market is tough, which is why the Australian Government has created a range of different first-homebuyer grants and subsidies.

Here are just some of the first-homebuyer schemes that might be available to you.

First Home Owner Grant (FHOG)

The FHOG was first introduced in July 2000 to offset the effect of the GST on home ownership. While this is a national scheme, each state and territory is responsible for administering this grant under their own legislation.

Please visit your relevant state or territory’s site for more information or to check the eligibility criteria. 

Home Guarantee Scheme (HGS)

The HGS is a government initiative designed to support eligible home buyers to buy or build a home sooner. It encompasses three key guarantees, including: 

• The First Home Guarantee (FHBG),
• The Regional First Home Buyer Guarantee (RFHBG), and 
• The Family Home Guarantee (FHG).

Under the HGS, part of an eligible home buyer’s home loan from a participating lender is guaranteed by Housing Australia. This enables an eligible home buyer to buy a home with as little as a 2%-5% deposit depending on the individual guarantee without paying LMI. 

Visit the Housing Australia website to learn more about the HGS.

Stamp duty exemption

Some states and territories also offer stamp duty exemptions or concessions for first-time buyers so long as you meet the eligibility criteria. This has the potential to save you thousands of dollars on the upfront costs of buying your home, so you can dedicate more towards your deposit.

There are big savings to be had with first-home buyer programs, so be sure to do your research to see if you’re eligible for any schemes.

Finding the Right Real Estate Agent

As a first-time home buyer, it can be helpful to work with industry professionals who are familiar with the local housing market. This is where an experienced real estate agent can come in handy. A good agent will have a thorough understanding of local market trends, pricing and neighbourhood dynamics. 

Not to mention, real estate agents often have access to listings before they hit the public market. If you’ve spent time building relationships with local agents, they’ll often think of you for these off-market opportunities and can help you arrange an inspection and potentially secure a deal before others have a chance to view the property.

With that said, it helps to have an experienced solicitor or conveyancer on your side too. You might also want to consider working with a mortgage broker to help step you through the home-buying process and find the best loan for your needs.

Searching for the Perfect Home

Once you’ve got your finances in order, it’s time to start looking for your dream home. When it comes to searching for the perfect home, there are a few key elements that you should consider to help guide your search. 

Here are some tips to help streamline your search:

• Define your criteria: Start by clearly defining what you're looking for in a property. Consider factors such as location, size, number of bedrooms and bathrooms and amenities. Prioritise your criteria to help focus your search to find a property that suits your needs and fits within your budget.

• Research neighbourhoods: Explore different neighbourhoods to find the right fit for your lifestyle. Consider factors such as proximity to schools, parks, shopping centers, public transportation and job opportunities. Visit neighbourhoods in person to get a feel for the atmosphere and amenities.

• Attend inspections: Take advantage of open homes to inspect properties in person. Pay attention to details such as layout, condition, natural light and overall feel of the property. Don't hesitate to ask questions and take notes. Here are 10 things to look for when inspecting a property.

• Consider your long-term goals: Think about the long-term potential of the property. Consider factors such as resale value, neighbourhood development plans and potential for appreciation. Assess whether the property meets your needs not just now, but also in the future.

• Trust your instincts: While it's important to consider practical factors when searching for a property, don't ignore your intuition. If a property feels right and meets your criteria, it may be worth pursuing further.

Making an Offer and Negotiating

Once you’ve found the perfect property, it’s time to put in an offer. You offer should include the offer price, the proposed settlement date and the conditions that your offer is based on. These conditions are designed to protect you if things don’t go to plan. They often include things like building and pest inspections, finance approval or even selling your current property.

At this stage, the seller might decide to accept your offer, reject your offer or provide a counter offer with a different price or conditions. If your offer has been countered, you can choose to negotiate with the seller until you reach an agreement or walk away from the offer. The negotiation period can take time, so it’s important to carefully consider their counteroffers before making a final call.

Performing Home Inspections

Buying a property is a huge investment, so it’s essential to do your due diligence as a buyer before you drop your life savings on your new home. It’s for this reason that many home buyers choose to include a building and pest clause in the contract of sale. A building and pest inspection can help to identify any potential structural defects, cosmetic issues and pest damage that you might not be able to spot yourself. Based on the findings of the report, you may be able to negotiate on the price of the property or back out of the sale without penalty if you’re not happy with the findings.

But the inspections don’t end there. As a buyer, you might also want to complete a pre-settlement inspection a few days before settlement to make sure you’re satisfied with the condition of the property before you take ownership.

The Closing Process

Your offer has been accepted and now it’s time to get the ball rolling on the property closing process, also known as the settlement period. During this time, there are a few steps that need to be completed before you can settle, including:

• Conveyancing: Both the buyer and seller engage conveyancers or solicitors to handle the legal aspects of the transaction. Your legal representative will conduct property searches, prepare and review legal documents and ensure that the transfer of ownership is completed correctly.

• Building and pest inspection: If you include a building and pest clause as part of your contract of sale, you’ll need to arrange for this to be completed within the allocated timeframe.

• Finance approval: If you’re applying for a mortgage, you’ll need to secure finance approval from your lender. As part of this process, your lender will conduct a valuation of the property to determine its worth as security for the loan. Read our blog on appraisals vs valuations to learn more about this process.

• Pre-settlement inspection: Shortly before the settlement date, you can complete a pre-settlement inspection of the property to make sure it’s in the same condition as when you agreed to purchase it. Any issues identified during the inspection should be addressed with the seller before settlement.

• Finalise legal documents: The conveyancers or solicitors for both parties work to finalise the legal documents required for settlement. This includes preparing the transfer of land document, adjusting rates and taxes and arranging for payment of outstanding fees and charges.

Once settlement day rolls around, your conveyancer will work with the seller’s representative to arrange the settlement on your behalf. At settlement, the outstanding funds are transferred to the seller and the title to the property is transferred from the seller to you as the buyer. 

The closing process doesn’t come without it’s own set of costs, so be sure to familiarise yourself with these fees beforehand.

Post-Purchase Considerations

Congratulations! You’ve finally settled on your home. Now what? As a homeowner, you’ll have a new set of responsibilities and expenses that you’ll need to keep on top of. Not only will you need to stay on top of your new mortgage repayments and account fees, but chances are there are a bunch of other ongoing costs that you’ll also have to fork out for, including council rates, strata fees, insurance, utilities as well as maintenance and repairs.

If you’re in need of a little more assistance when it comes to buying your first home, Unloan has you covered. Check out our great range of resources and articles over at our Learn hub. From our step-by-step guide to buying a home to mistakes to avoid during the home-buying process, we’re here to help you buy your first home.

If you’re ready to buy your first home, you can also apply with Unloan, where you could get conditionally approved in minutes. 

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000. 

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.