Ready to enter the Perth property market and buy or build your first home?
Embarking on the adventure of buying your first home can be daunting and scary at times; overwhelming and tedious at others, but come the end of it all it’ll be rewarding and justified. There’s an awful lot to get through before you even get there however. You need to have an idea about your borrowing power, what deposits are needed, who can help you on either of those fronts, and what exactly your plan of attack is going to be! We’re going to try and help with a few of those for you.
How much can you borrow as a first home buyer?
This is quite often the biggest concern starting off; you’ve got your eyes on your dream home, but can you afford to borrow enough to even think about getting it? Well let’s get looking and see what we can find out!
First it’s a good idea to check to see if you can be Pre-approved. With pre-approval it takes a lot of the guess work out of what you can afford, and it’s also valid for around 3 months, which is quite handy if you’re shopping around at auctions for your new home. Pre-approval also helps when it comes to calculating the repayments on your home loan.
If you know what you can be lent, and have a rough interest rate in mind you can do some quick math to figure out your monthly payments. Given your own finances you should have a pretty clear picture at this point of what’s affordable for you, and if you’d need to tighten any purse strings before getting started. We can offset both of these amounts with a guarantor or your deposit which is what we will look at next.
Often having someone else act as a Guarantor on your loan can help to offset plenty during the borrowing process. The way it works is that a guarantor provides the lender with an extra level of security when lending you the money for your home. Ensuring that if you cannot make your payments for whatever reason; than the guarantor will make them for you. This reason is generally why family or parents of the borrowers are the ones to be guarantors. The benefits gained by using a guarantor however can come out as lower deposits being required, sometimes even no deposits at all, and even no need for LMI (Lender Mortgage Insurance).
This is one of the sorest spots for Australians trying to get their first home; saving up that 10-20% for their dream home is often quite difficult, and some may see it as impossible; but realistically it simply takes the proper motivation and adherence to strict planning to pull this off. However aside from being a large chunk of money, what does the deposit really DO for you in the grand scheme? Your deposit affects your lenders actions in several ways that we will take a brief look into; some can drastically impact your loan in positive or negative ways.
Showing up to a potential lender and asking for a home loan with a substantial down payment already in hand is going to give them a positive sense of what your repayment prospects will be. The practical upswing of this is that you will receive better loan terms than those with a smaller deposit.
Aside from lower monthly payments due to the lower principle borrowed, the amount you put down prior to getting your loan may also enable you to get a better interest rate from the lender. This in turn obviously affects your repayments as well, and the final point for making a sizable deposit for your home is that it could offset the need for lenders mortgage Insurance. While this primarily protects the lender in this instance, some new home owners would rather pay the premiums for this service, instead of saving up that 20%, the decision here is ultimately personal choice and situational but should be considered all the same.
So far this is a lot of spent money, so next we will take a look at how to get some back! (In a sense)
First Home Owner Grant in WA
An excellent program aimed at doing just that, getting new home buyers into their first homes. While this functions differently across Australia we’re going to focus on the Western Australian version for today’s purposes. First off there are some eligibility requirements for it, but they’re pretty straightforward.
- Be a permanent resident of Australia, or a born citizen
- You must live in the home as your main residence beginning
within a year of settling, for at least 6 months.
- Available for new homes you’re buying or building. Not available for buying established homes.
There are two different aspects of this Grant that you need to be aware of. The first is for Established homes. If you’re purchasing an established home, then the previous grant of $3,000 has been abolished. Now if you’re purchasing or building a new home itself, than this FHOG supplies you with up to $10,000, so long as the property value is up to $750,000 or $1,000,000 if you’re North of the 26th parallel of Southern Latitude.
An additional $2,000 can be had through the Home Buyers Assistance Account, though there are some more conditions there. For a more in depth look at the available resources for you don’t hesitate to check the Department of Finance WA website.
There are an awful lot of strings to pull and avenues to research and get to know when it comes to buying your first home. Thankfully mortgage brokers know all of those nooks and crannies they need to check, they know what options are available for you, and will work to make sure your situation gets the solution it needs. So it’s always a good idea to work with a mortgage broker when traversing the home ownership game as they even the playing field, and work for you alongside the banks, rather than you having to go to them.
It’s Easier than you think
It can be a scary thing to start looking into; it can be tiring at times and can often feel hopeless and out of reach. Hopefully with some of these tips moving forward, you’ve got a bit of ground under you to move onward with. Strict planning and adherence to those plans is going to serve you well, and don’t underestimate the power and knowledge of those who’ve done this before you, or do so as a living. They can and will help you on your way, consult your parents and family who own their homes, consult a local mortgage broker and start down the path to home ownership today, don’t let it be just another dream any longer.