If you’re contemplating becoming a homeowner in the next few months but not sure where to start, this blog is for you! We’ve asked our recent first home buyers and investors to give their best advice for first home buyers looking to enter the property market in 2021.
To put it in perspective, a house is typically the largest purchase you will ever make, so it’s important you understand every part! The most common advice received from our recent buyers was to encourage all future homeowners to explore their options. Even if you think you know the location you want or have your heart set on a builder, you should still research into all possible options. Keeping an open mind about your options will help you make an educated decision on what the right purchase is for you, rather than limiting yourself at the beginning.
Explore your options
There are many steps to buying your first home and although some may seem daunting, it is important to figure out what type of house you want and what finance options are available to you at the beginning of your home search.
Home buyers in 2021 have access to many different dwelling types such as a traditional house, townhouse, apartment, home & land options, dual key and granny flat. The most common option is a traditional house as the purchasing process is fast. As there are many Government Initiatives available to use towards your first home, it’s important you consider all your housing options to avoid any regrets, like not utilising Government Initiatives that you would’ve been eligible for if you chose a different dwelling type, you may have in future.
There will be various finance options available to you to for your first home, so be open to everything! You may think you know what bank you want to use for your home loan, but will it be the best bank for you? One of the best options for finance is finding a reliable finance broker who will assist you to find the best bank or lender for your current financial situation. It is the finance broker’s responsibility to review all your options and identify which banks are suitable for your situation. The difference between speaking directly to a bank and a broker is that the bank has only one lender available, whereas a broker will look at all tiers of lenders and determine what is in your best interest.
One of the biggest perceived hurdles of beginning a homeownership journey is the discussion of deposits. There is no set figure or percentage you need to save for a deposit as each house and lender have different requirements. A common misconception is thinking you need a 20% deposit to buy your first home. Fortunately, this is not true! The two main benefits of having a 20% deposit to use for your first home is lowering your loan amount, which reduces your mortgage repayments, and not needing to pay Lender’s Mortgage Insurance (LMI).
Traditionally, lenders prefer to see you have been able to save a minimum of 5% deposit and held this for longer than 3 months. This is classified as “Genuine Savings.” However, life doesn’t always work out the way we want it to. It can be hard to save for a house deposit and demonstrate genuine savings if you are renting and have a family to look after. Fortunately, there are other ways to help you with your deposit.
If you are renting, there are some lenders that will consider your rental history as a method of savings. They understand if you can pay your rent, you are likely to pay your mortgage. To use this option, you need to be renting through a registered real estate. Depending on the bank you go to, a private rental agreement may not be accepted.
A gift is another option that could assist you with your deposit. If your parents are able to, they can gift you the money to use for a deposit to buy a home. The gift could be money available from their savings account, sale of an asset or an inheritance. If you do receive a gift from your parents, the lender will require for your parents to prove the money is non-refundable, usually by completing a gift letter.
Another option that could assist with your deposit is having a family member act as a Guarantor. A Guarantor, often referred to as a Family Pledge Loan, is when a family member provides additional security for your home loan as they will use their equity in their own home to guarantee your deposit for your first home. If you use a Guarantor for your home loan, it is also a way to avoid the cost of LMI (which could save you thousands of dollars).
For a brand new home, there are Government Initiatives that can assist with your first home deposit. The Queensland First Home Owners’ Grant is valued at $15,000 and can be used with your deposit. The First Home Loan Deposit Scheme is a Federal Government Initiative that can assist you purchasing your first home with a 5% deposit and you will be exempt from paying LMI.
If you are interested in entering the property market or would like to receive an insight on the current property market, contact QPG on 1300 248 514.