What to Know Before Buying Your First Home

What to Know Before Buying Your First Home

Buying your first home is a big deal. It’s exciting but can be pretty overwhelming.

I'm Cara Haynes, a mortgage broker with Loan Market, and here’s a few things to know before you start house hunting.

Let’s start with your deposit and budget.

Buying a home will likely be one of the biggest purchases you ever make. This is adulting people! So it’s important to be realistic and well-prepared.

An ideal deposit is 20% of the purchase price. So for a $500,000 home, that’s a savings target of $100,000. Now, if that number feels out of reach, don’t worry, some lenders accept deposits as low as 5%. Just keep in mind, anything under 20% usually means you’ll need to consider paying Lenders Mortgage Insurance.

Lenders Mortgage Insurance, or LMI, can be expensive, and did you know the cost varies from bank to bank? The good news? Unlike home or car insurance that’s due each year, LMI is usually a one-off payment, and most lenders will let you add it to the loan rather than paying it upfront.

No one wants to pay LMI, but in an ever rising market, it can be worth it to get in sooner. That $500,000 home could be $550,000 or more by the time you’ve saved that 20% deposit.

If you’re short on deposit, there are also other options like guarantor loans and first home buyer schemes and grants that might be available depending on where you live. Some banks will even consider waiving Lenders Mortgage Insurance for people working in industries like education, health, law and accounting, just to name a few.

Also, remember to budget for extra costs like stamp duty, legal fees, and building inspections.

A Loan Market broker can give you a clear breakdown based on your State and situation.

How much can I actually borrow?

This is where things get more specific to you.

Lenders will look at your income, existing debts, credit history, and your overall financial position to figure out how much they’re comfortable lending to you.

What’s left over is called your borrowing power, and it helps set your upper purchase price. While there are plenty of online calculators available, a broker can give you a more accurate number based on the full picture.

If you don’t already have a household budget, now’s the time to review your spending. What’s essential? What can you live without?  You need to feel confident you can afford the loan, every month, for just about 30 years! No pressure!

There are thousands of loan products out there and plenty of jargon. Offset account or redraw? Fixed or variable? Interest-only or principal and interest?

It’s a lot, but you’re not expected to have all the answers.

That’s where we come in. Once we understand your deposit and borrowing power, we’ll compare over 60 lenders and help you select the home loan that suits your specific goals and lifestyle.

What is pre-approval (and do I need it)?

A pre-approval is when a lender, in principle, agrees to lend you a certain amount of money. It’s not a guarantee, but it gives you a clear idea of your budget and shows sellers that you’re serious.

It’s especially helpful for first-home buyers — you can shop with confidence and avoid wasting time on properties outside your budget. 

Pre-approvals usually last for 90 days, unless there has been a material change in your income or circumstances.

Buying your first home doesn’t need to feel overwhelming.

With the right support and a bit of planning, you’ll feel informed and in control.

A Loan Market broker can guide you through the whole process — from working out your budget to getting the keys in your hand.