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Everything first time home buyers need to know about getting a home loan

These days, if you’re looking to buy your first home in a city like Brisbane, you’ve probably heard some people say property prices are higher than ever before. However, there’s no need to fear! You can easily get your foot in the door in a number of different ways. The most common option is to take out a home loan.

Lucky for you, our team are specialists in helping first home buyers like you access the finance they need to buy their dream homes as soon as possible. If you’re not sure how much you can borrow or how to best go about accessing the finance you need, we’re here to help. You might find your questions answered below though if you have more, you are welcome to contact us at any time.

The ultimate guide to home loans for first home buyers

There’s nothing that quite compares to the feeling of turning the keys and unlocking the door to your new home for the first time. The build up to this moment can feel stressful but this is the very moment in which you know it’s all paid off. The budgeting, the hours spent house hunting and all the 2 minute noodles that substituted as your ‘dinner’.

At Time Home Loans, it is our mission to help you experience this moment as soon as possible! Below we’ve outlined the steps that will get you there and along the way, we’ve also answered some big questions you might have.

If you’re looking for a home loan in Brisbane, chat to our team today.

Step 1: Figure out where you’re at right now

It is important to start this journey with a clear picture of your current position. Look at your savings and assess how much money you have available for a deposit on your home. Look also at your earning capacity, your expenses and your capacity to continue saving.

Consider also whether you are eligible to receive assistance from the Government. The First Home Owners Grant along with the First Home Super Saver Scheme are two current initiatives that support first home buyers in their journey to pay for a house.

To get a well rounded idea of your position, you can also use our simple calculators to help you work out your current financial picture and how long it might take you to reach your savings goals.

Easy number crunching with these tools:

If you need a hand with making sure you’re on the right track, you can reach out to our team at any time. We’re always here to help, no matter what part of your journey you are on.

Step 2: Look at your home loan options & get educated

After you have a clear idea of your current financial picture, it’s worth looking at the average property prices in the area you wish to buy in. If you’re based in Brisbane, you can check out Place to help with your search.

Knowing the area you’d like to buy in and the average property values will help you determine the best financing option for you. If you need to access more money than you have saved, a home loan is the best way to go about it.

There are 3 ways first home buyers can get access to a home loan:

  • How it works

    Your parents assist you by using their property or term deposits to form part of a limited guarantee

  • What you need
    • At least one parent who owns property in Australia and is both willing and eligible to be your guarantor
    • A deposit, this will depend on the value of the guarantor’s equity and may or may not be needed
  • Pros
    • You can avoid fees such as Lenders Mortgage Insurance*
    • Your loan will attract better rates
    • Your loan to value ratio will be higher as the value of your parent’s property will make up a big chunk of your contribution
  • Cons

    The value of the guarantor’s equity is subject to market fluctuations

You can use these tools to help figure out how much you might be able to borrow:

*What is Lenders Mortgage Insurance (LMI)?

It’s a one off fee that covers the lender against the possibility you might default on your loan repayments. The fee only applies if your initial deposit is less than 20% of the property value. The bigger your initial deposit, the lower the LMI fee.

  • How it works

    You hustle, you budget and you save as much as you can for a deposit on your first home.

  • What you need
    • A steady income
    • Keeping expenses low
    • Commitment and determination to put money aside
    • Discipline, casually ‘dipping’ into your savings will be the death of your deposit!
  • Pros
    • A deposit from genuine savings is looked very favourably upon
    • You only need to save at least 5% of the value of the home to access more finance
    • You can access the loan without seeking help from your parents
  • Cons
    • If your deposit is less than 20%, Lenders Mortgage Insurance* will be an added expense
    • It can take a longer time to save the amount you need
    • On houses over $500,000 in value, stamp duty will apply

You can use these tools to help figure out how much you might be able to borrow:

*What is Lenders Mortgage Insurance (LMI)?

It’s a one off fee that covers the lender against the possibility you might default on your loan repayments. The fee only applies if your initial deposit is less than 20% of the property value. The bigger your initial deposit, the lower the LMI fee.

  • How it works

    If you don’t have genuine savings you can receive a non-refundable ‘gift’ from family or friends which can help you make up the 5% initial deposit.

  • What you need
    • Family and friends willing to lend you money
    • A rental ledger from the past 6-12 months to prove you can meet your weekly obligations to the lender
  • Pros
    • You do not need to have a large sum saved up
    • Get started quicker
  • Cons
    • You’ll need to be very clear on the agreement with your friends and family who are lending you the money
    • Risk of over-stretching your finances
    • You will need to cover Lenders Mortgage Insurance* if their deposit is less than 20%

You can use these tools to help figure out how much you might be able to borrow:

*What is Lenders Mortgage Insurance (LMI)?

It’s a one off fee that covers the lender against the possibility you might default on your loan repayments. The fee only applies if your initial deposit is less than 20% of the property value. The bigger your initial deposit, the lower the LMI fee.

Step 3: Finding a home you’ll love and a loan you’ll love even more

Let the house hunting officially begin! You’ve probably already had a quick look at different areas you’d like to buy a house in and the values of properties in those areas. Things start to get more serious now that you know what financing options are available to you. At this stage, start looking at properties and assessing if they come with any hidden baggage that you’ll have to pay for, such as:

  • Stamp Duty
  • Lenders Mortgage Insurance
  • Legal fees
  • Building & Pest Inspection
  • Home and Contents Insurance
  • Property Valuations
  • Moving Costs
  • Legal Costs

Make sure you factor these in so your loan covers the full cost of your property. Choosing the right loan is just as important as choosing the right home.

Step 4: Buy your first home

Once you’ve found your ideal home loan and you have a solid idea of how much money you can access, you can begin the process of buying your home. You will need to make a proposal to the seller and reach an agreement with them. When you both agree on the amount and terms of the sale, the settlement process will begin and your loan will be finalised.

To prepare for the settlement, you will need to make sure you’ve got the following sorted out:

  • Have a lawyer review your contract of sale
  • Sign the contract and give it back to the seller
  • Officially start your home loan application (HINT: make sure you have all documentation ready!)
  • Arrange a building and pest inspection
  • Organise a final inspection of the property
  • Make sure you have enough funds to cover the settlement and your lawyer’s fees
  • Collect your keys on settlement day and celebrate!

Need help accessing a loan for your first home?

At Time Home Loans, we assist our clients from start to finish to ensure they are getting the best out of their loan at every step of the way. Our 7-day finance terms mean you can access your loan and secure your dream house much faster.

We know it can be really confusing to look through all the different rates offered by banks and lending institutions, that’s why we take care of that for you. We’re always on the hunt for competitive offers that you can access.

If you’d like more information about how you can buy your first home in Brisbane, contact us today.

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