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5 tips for securing your first home loan

set of keys with a house

Making the decision to purchase your first home is a major life milestone. Whether you’re buying an existing house or building a home from the ground up, purchasing a new home is an exciting and challenging process. 

For many first home buyers, most of the headache of buying a new home is at the early stages of working out finances and getting a home loan. The number of options on the market, combined with competing information spread online and by word of mouth, only complicate matters further. To help set the record straight, we’ve teamed up with the financial experts at Loans.com.au. Whether you’re considering building your dream family home or buying an existing one, read on for five tips for securing your first home loan.

  1. Know how much you can borrow

Before you start searching for your dream home, it’s important to know how much you’re actually able to borrow. The size of the home loan you can take out will depend on your income and financial situation, and determine what sort of property you can buy and where.

To work out how much you can borrow, book an appointment with a lending representative at your bank, and work with them to determine a figure you can use as a guide. If you’re keen to start your house search sooner rather than later, use Loans.com.au’s Borrowing Power Calculator to come up with a rough guide you can start using straight away.

  1. Explore the possibility of a First Home Owners’ Grant

The Federal Government’s First Home Owners’ Grant is only available to people who are building a new home – not purchasing an existing one. The size of your grant will depend on your build location, the value of your property, and the date of your contract. 

To be eligible, you must be an Australian citizen or permanent resident and purchase a home or apartment off the plan with the intention of living in it for at least 6 months within a year of settlement. Certain other factors may affect eligibility, so we recommend consulting your state government’s website to be sure.

  1. Shop around

Shopping around is the key to getting the best interest rate. Before entering a home loan agreement, always check in with multiple providers to see which can provide you with the most competitive interest rate and meet your other needs. Beyond the interest rate, other factors to consider include associated costs, fees, and customer service, in addition to the different types and features of available mortgages.

  1. Get the necessary documents in order

If you’re buying a house, your lender will request a list of necessary documents before you move to the application stage. This list will vary from lender to lender, but typically includes proof of:

  • Identity
  • Income
  • Assets
  • Liabilities

If you’re building a new house, your lender will request certain documents before proceeding to construction. Generally, these will include:

  • Contract of sale or other proof that you own the land
  • Fixed-price building contract from a registered builder
  • Evidence of a deposit
  • Detailed construction plan
  • Permit to build from the local council

In both cases, having these documents ready and in the correct form can save you a lot of time during the home loan application process. 

  1. Research potential additional costs

Before diving headfirst into buying a house, it’s important to note that mortgage repayments will not be your only responsibility. Additional costs may include:

  • Stamp Duty – A state tax that must be paid within 30 days of the property settlement. As stamp duty is collected by your state or territory government, rates may vary. Some states give special First Homeowner discounts for buyers who meet certain criteria, so check with your relevant government if you’re unsure.

  • Valuation – Most lenders will require you to pay out of pocket. Generally, this is a valuation of the property you are using as security when you apply for a home loan.

  • Lender’s Mortgage Insurance – An insurance policy that protects the lender from financial loss in the event that the borrower can’t keep up with their home loan repayments. Most lenders make this type of insurance a condition of borrowing if you provide a deposit worth less than 20% the value of your new home.

Similarly, building a new home will incur costs in addition to your mortgage, including:

  • Soil & Contour Tests – This can cost between $1,000-$2,000. Builders must undertake these tests before giving you a fixed quote for construction. If these tests identify rocky soil or other complications, you will face additional construction costs.

  • Site Costs – This will likely to be the highest costs you incur when building your own home. This will depend on the location and condition of your desired site, and could range from $10,000-$70,000.
  • Flooring & Driveways – This may be excluded from your builder’s quote. Set aside extra money for floorboards, tiles, and carpets, in addition to costs for constructing a driveway.

Plan ahead to make securing your first home loan a breeze

Getting finance to buy or build a new home can be challenging, but it’s not impossible. With a bit of planning and forward thinking, you can secure a first home loan and get started on your journey toward living in your dream home.

Ready to get the ball rolling? Explore our home designs to start dreaming about your future home today.