What the Best Tips for First Home Buyers in 2022

Buying your first property is an exciting time: the prospect of painting the walls, hanging pictures and creating your own sanctuary away from the world is exhilarating. Interest rates are at historic lows, making 2022 the perfect time for first home buyers to jump into the property market across Australia.

As a first home buyer, there is a lot of research to be done before you even decide what you are looking for exactly and embark on the house hunting process. You need to know how much you can afford to repay on a loan, which areas are suitable for your needs and understand how different interest rates can affect your loan in the long term. With all that in mind, here are our top tips for first home buyers looking to purchase their dream home in 2022. For best advice hire a conveyancer.

#1 Make sure that you are eligible for a home loan

Don’t make the mistake of assuming you’ll be able to get a loan, as banks and other lenders are notoriously strict about offering home loans to clients. Their rigidity is for a good reason – they need to be sure that you will be able to afford your repayments. Before you go house hunting, get in touch with several lenders. They will assess your financial position (your income, savings and debts) to calculate how much you can comfortably afford to repay per week and, therefore, how much you are entitled to borrow. Without knowing this, you won’t know what price range you can afford to look in.

#2 Consider your loan options

Each bank has various rates, packages and lending policies. There are several options – from variable to fixed-rate loans to interest-only and investment loans – and many different types of mortgages suit different situations.

Furthermore, you should know that banks aren’t the only big lenders in Australia. If you can’t find a bank to lend you money for a home loan but are confident you can afford the repayments (for example, if you are self-employed and the banks see you as ‘high risk’), private lenders might be willing to loan you the money. The difficulty with private loans is that your interest rate will usually be significantly higher than you might get from a bank. However, if you are keen to get into the property market and can’t find the resources you need through a bank, turning to a private lender might be worth investigating. It’s a matter of finding the right lender and right loan product for you and your situation.

#3 Consolidate your debt to increase your borrowing power

Personal debts such as HECS, car loans or credit card debt can significantly minimise your borrowing power. Did you know that a high credit card limit can inhibit your borrowing power? Even if you don’t use your credit card, banks will calculate your minimum repayments into your living expenses.

Banks are far less concerned with HECS debts than they are about your credit card debt, so balance your current obligations to see which you should focus on paying off first. It could also be of benefit to you to consolidate your debts into one low-interest loan. Take stock of your debts before you go in search of a home loan – it could make a world of difference in getting the loan amount you need.

#4 Look into your deposit percentage options

It used to be that banks would only loan you 80% of the property price, meaning you had to have saved up 20%. But since the introduction of the First Home Loan Deposit Scheme (FHLDS), first home buyers can get a home loan with just a 5% deposit – without paying lenders mortgage insurance.

For example, before the FHLDS was introduced, you would need to have saved up $80,000 to be considered for a loan on a $400,000 property. If you are currently renting, saving that amount is incredibly challenging; virtually impossible to do in a short time. But when you borrow with only a 5% deposit, you could buy that same house with just $20,000 in savings. While still a significant amount, it is a much more achievable goal and something you should talk to your lender about.

#5 Find the right team of professionals

First home buyers probably know that they will need a mortgage broker or lender on their team, but have you thought about the other necessary professionals you will need to make your property transaction a success?

We’re talking about property conveyancers – the legal professionals who can assist you to navigate the laws surrounding property sales. Your property conveyancer will:

• Prepare documentation;
• Talk you through the documents to ensure you understand every step of the process;
• Research the property and certificate of title to check for any legal infringements that may delay or halt your transaction;
• Check the property title for easements;
• Put your deposit into a trust account;
• Conduct the property settlement; and
• Represent your interests with the vendor.

With such a fundamental role to play, it may surprise you to know that most buyers don’t hire a property conveyancer until the last minute, causing them to make a hurried decision. The best idea is to find a property conveyancer local to the property you purchase (so they understand the local property laws) as soon as you start house hunting. That way, your conveyancer can also look over any documents of sale from houses you have inspected to let you know of any irregularities to the sale, such as:

• Liens (other legal claims to the property);
• Exemptions (where such items as the oven, curtains and spa bath are exempt from the sale); and 
• Tenancy arrangements (where the property might be tenanted for the first year of your ownership). 

#6 Calculate your stamp duty 

All property buyers in Australia are required to pay stamp duty, but first home buyers get a discount or complete exemption depending on your state or territory and the type of property that you buy. Most buyers will borrow an amount to cover the stamp duty, so by understanding your stamp duty concessions before calculating how much you can spend on a property, you could increase your budget.

#7 Don’t forget about the First Home-Owner Grant

You’ll potentially benefit from a grant worth thousands of dollars if you are eligible, depending on where you live and the type of property you buy, so it’s definitely worth exploring whether this option is available to you. 

#8 Budget for all of your other costs

Buying a house is an expensive venture. As well as the cost of the property, the conveyancer’s fees and lending fees, you’ll also have to budget for such expenses as:

• Pest/building inspections;
• Moving costs (removalists, van hire, storage unit rent);
• Home loan application fees; and
• Furnishings for the new house.

If you don’t budget carefully, you could end up losing a lot of money. If you make an offer and it is formally accepted, you risk losing 5% of the property value for backing out of the sale if you realise you can’t afford it. Worse still is if you buy at auction, where backing out will cost you the entire deposit. Save yourself the heartache of ending up back at the start by carefully calculating ALL your costs before you start your house hunt.

If you’re a first home buyer looking to put together a team of professionals to support you through your first property transaction, call Jim’s Property Conveyancing today. For more information about Jim’s Property Conveyancing in Melbourne, or for information about Jim’s Property Conveyancing in Brisbane. Or for expert advice on property conveyancing services in Australia, please get in touch with our friendly and experienced staff on 13 15 46.