Our beginners guide to buying your first home

The journey to buying your first home is similar to venturing into the great unknown and can be filled with endless stumbling blocks and difficult decisions that need to be made. We've gone to great lengths to break down the jargon barriers and help you navigate your moving journey with ease. 

Here are some of the benefits of banking with us when you're buying your first home: 

• Speaking to the same person every step of the way
• Access to our competitive home loan rates
• The ability to borrow up to 95% of the value of the property, inclusive of loan mortgage insurance

Step 1: What to consider when buying your first home  

First steps to buying your first home 

Buying your first home can be a life-altering venture with many highs and lows along the way. Maybe you're moving out of home for the first time? Maybe you've just completed your studies and you're starting your first job? Either way, we're here to help simplify the process.

Here are some key points to consider when buying your first home:

• Set yourself a budget and understand what you're currently spending money on 
• Understand what you can borrow 
• Know what your deposit amount needs to be 
• Consider how long you intend living in the property 
• Know what your monthly repayments will be 
• Work out a savings plan for rainy days 
• Understand the upfront and ongoing costs of home ownership
• Once you've settled on a suburb, research the area and home pricing 
• Investigate if you're eligible for a first home buyer grants or the Homebuilder grant

For more savings tips for purchasing your first home check here

Step 2: Understand what your home buying costs are

What are the upfront and ongoing costs

When buying your first home it's important to consider all of your expenses, including not only the more obvious upfront costs, but also ongoing costs that will also need to be accounted for. 

Upfront costs:

• Stamp duty - a duty or tax charged by the State Government for specific transactions, including purchasing your first home. The amount is determined by the purchase price of your home. We've got a handy stamp calculator here 
• Lenders mortgage insurance - only required if you have less than 20% of the home deposit
• Legal fees - for completing conveyancing and title searches on your new home. Costings can vary, but generally should be around $1,500 to $2,500
• Building and pest inspections - this is a report on the structure and condition of the home you're purchasing. This cost varies depending on the Building and Pest Inspector, but can be around $400 - $700
• Home and contents insurance - covers the cost of replacing or repairing your household possessions in the circumstance of accidental loss, theft or damage
• Property valuation - an independent valuation of your home to determine what it's approximate worth
• Moving costs - hiring removalists or a van, in addition to the cost of boxes
• Remodelling - often home new homeowners may want to update the property before they move in eg. new blinds, or even bigger projects such as new bathrooms or kitchens

Ongoing costs: 

• Mortgage repayments - most lenders will offer a flexible repayment option suited to your pay cycle. 
• Council rates - houses generally attract a high fee than units
• Body corporate fees - apartments and units often charge residents body corporate fees for the general maintenance of common areas
• Utilities eg. gas and water 
• General maintenance eg. cleaners and gardeners 
• Repairs and breakages eg. leaking taps

Find more out about stamp duty here

Step 3: Working out your buying budget

What you can borrow and afford

Now you understand what your upfront and ongoing costs are it's important to drill down on your budget. Every home buying journey should begin with a clear budget in mind. Budgets help us understand what we're spending, where we can save and what we can afford. In layman's terms, your budget is your expenses minus your earnings, and what remains could potentially be your savings. 

When organising your budget don't forget to also include what you plan on saving per month to help you work towards any future financial goals you might have. BOQ Money can also take the hassle out of budgeting by allowing both BOQ customers and non-customers to easily find out where their money is being spent. Remember your borrowing power will be likely be affected by your income and also your expenses. 

For a budget planner tool check here

Helpful tools for buying your first home 

Get moving faster with our budget calculator 

These tools make it easy to calculate how much you can save based on your income and expenses. These calculators can also help you determine what you're spending and where and how you can monitor your monthly expenses to make your move easier. 

Step 4: Other important considerations

Should I get a conditional approval?

Obtaining a conditional approval is a great way of getting an actual estimate as to how much you can borrow and finding out whether you will be approved for a loan. It is also a great way of showing real estate agents that you're a serious buyer and can speed up the finance application process once you have signed the contract of sale. 

How much deposit do I need?

The minimum, home loan deposit you should have is at least 5% of the purchase price of the property. However, Lenders Mortgage Insurance will apply if your deposit is less than 20%, which is a one-off fee that covers your lender against loss if you default on your repayments. This fee is added to your loan amount and allows you to borrow more than 80% of the property value for home loans. 

Am I entitled to the first home owners grant? 

Government grants are a great way to receive financial assistance when buying your first home. However, depending on where you buy, your eligibility requirements for your first home owners grant and the amount you may be entitled to varies from state to state.

What grants are available to me?

For more information about grants available to first home owners, click on the links below:

• First home owners grants
• Homebuilders grant (if you are building your first home).

Step 5: Choosing your first home loan

Choosing the right first home loan is just as important as finding the right first home for you. Your home loan needs to have all the features that suit your personal circumstances and those that will help you pay off your home sooner.

Some considerations to keep in mind when selecting your first home loan: 

• Principal and interest loans - the most common home loan, where you'll make set payments towards the principal (the original amount loaned), in addition to paying interest
• Interest only loans - the principal amount will not reduce over the life of the loan, as you will be paying the accrued interest earned only 
• Split loans - when a portion of your loan is fixed and a portion is variable
• Fixed rate loans - when your interest rate will remain unchanged for a period of time, generally 2-5 years when the loan will typically revert to a variable rate loan
• Variable interest rate loans - the interest rates can either go up or down depending on various external factors
• Redraw facility - have access to extra repayments on your home loan when you need it
• Mortgage offset - reduce the interest you pay on your loan by keeping your savings in a mortgage offset account

For more savings tips for purchasing your first home check here

Step 6: Approval for your first home loan

When you're applying for your first home loan the lender will asses you on many factors. Your lender will want to ensure you can repay your mortgage over the course of the loan. The assessment will be broken down into three categories; what you earn, what you owe, and what you own. 

Some of the factors your lender will assess you on during your home buying journey: 

What you earn 

• Salary - you'll likely need to supply two of your most recent payslips as proof of employment
• Investments - any earnings from shares, managed funds your lender will likely require proof
• Rental income - if you receive rental income you will likely need to supply statements
• Government income - if you receive government support

What you own

• Savings eg. a term deposit amount  
• Substantial personal assets eg. a car 

What you owe 

• Credit cards or loans eg. students debts, leases 

Here are some important documents you'll need as proof of identification: 

Primary identification 

• Current drivers licence and/or current passport or birth certificate 

Secondary identification 

• Council rates notice, credit card, debit card, Medicare card, health care card 

For more savings tips for purchasing your first home check here

Step 7: Making an offer on the home

Once you've found the first home of your dreams, it's time to make a formal offer. While negotiating your price with the seller can often be a challenging experience, it's important to remember to not be too inflexible, while also still be cautious. 

Some considerations to make when making an offer on your first home: 

• Private sale offer - sale through a real estate agent, by private treaty or directly from the owner is the most common way to purchase property
• Bidding at auction - prior to purchasing a home at auction it's usually necessary to have pre-approved finance. It's important to remember that purchasing at auction doesn't typically allowing a cooling-off period should you decide to not proceed with the purchase 

Step 8: Final steps for buying your first home

Once you have reached an agreement with the seller, the settlement process can begin. On settlement day, your legal and financial representatives will ordinarily meet with the seller's representatives to transfer the ownership of the property from the seller to you (the buyer). The settlement date is set in the contract of sale, and is typically between 30-90 days. 

To prepare for settlement, you'll likely need to do the following:

1. Contact a solicitor or conveyancer to review your contract of sale before you sign it
2. Return your signed contract of sale to the seller or the seller's agent
3. Speak to your lender to start your home loan application. Ensure you have all your necessary documentation
4. Speak to your solicitor or conveyancer about requesting any property searches you may want or need
5. Organise a building and pest inspection
6. Ensure you have enough funds to cover the property settlement and solicitor’s fees
7. Organise your final inspection of the property.  This is usually done on the day of settlement or close to it
8. Collect your keys on settlement day and celebrate your new home

Here's some more of our top savings tips

Ready to get started?

We’re here to answer any questions you may have.