All first home buyers’ sticky questions answered

Written by Douglas Ross in Buying on September 26, 2016

All first home buyers’ sticky questions answered

There’s no time to waste! Let’s get to it. You, first home buyer, have questions. Here are the answers:

How much money do I need for a first home deposit?

The go-to number is 20% of the purchase price plus costs (see next question!) and this is usually the number put down to avoid having to pay Len­­ders Mortgage Insurance. But if a 20% deposit, plus costs, leaves you with very little left over then this may not be for you. Putting a 5% deposit down and taking the $5,000-$15,000 mortgage insurance out onto the balance of your loan can sometimes be possible. The growth of your property’s value may in the end dwarf the cost of putting your insurance onto your loan.

Calculate how much you can borrow and what you will need to save for your deposit with our free mortgage calculator.

What extra costs are involved?

  • Lenders Mortgage Insurance: you can avoid this if your deposit is large enough or if you use your parents as guarantors.
  • Consultancy fees (builders, contractors, solicitors, pest inspectors, financial planning)
  • Home insurance: basic home insurance is often a requirement for getting a loan.
  • Stamp duty: this depends on the location and price of your property.
  • Application fees

What should I look for?

Are you looking to be an owner-occupier or is this an investment? The key is to take your time and really spend months and months looking for your property. Make a list of the properties you inspect and track their progress. Avoid an emotional buy and instead rely on your research and input from outside sources. Of course, your research should lead you to a property you really like.

Always look for the best investment property you can get for your dollar rather than buying in order to get a grant or government assistance. Have fun with the research and become an honorary professor in your local real estate industry. The more informed you are the less chance of investing poorly.

What professionals to use?

If it applies, invest in a Strata Check (this is for when buying within a building), as well as a building report and valuation. If the property is a stand-alone building than just a building report and valuation will give you peace-of-mind when it comes to such risks as pests, concrete cancer and the structural integrity of the property. As a first homebuyer, money is always a concern and investing $1,000 into these services for each property you are considering may not be an option. If you have only been looking for a couple of weeks, it probably isn’t a wise idea to go spending that money. Wait until you have done months of research and are ready to buy before investing in services like these.

Choosing a loan?

Visit our post on features to look for in a home loan for an insight into saving money on loans. Beyond this, consider the money you can make from a house with better growth prospects rather than the money you can save between loans. While it is worth reading up on loans and getting the best deal, try not to fixate on small savings but instead focus on the big picture. What really interests you is the property, so focus on its value as an investment before you focus on any savings you can get from your choice of loan.

Auction or private sale?

After searching and visiting hundreds of listings, you will have narrowed it down to a handful that you really like at any one time. It is always worth going to an agent with an offer that sits well within the seller’s expectations and pointing out that your offer is a sure thing.

As a first homebuyer an auction can seem just a little daunting. Consider using a buyer’s agent to help you find listings and finally bid for you. They may end up saving you tens of thousands because of their knowledge and skills as a bidder.  If you want to know more about preparing for auction, here are our top tips to get you through the day.

What is required after I win at auction?

Have you just won an auction and googled what happens next? Congratulations! By bidding, you agreed to the same contract that was on display before the auction. You had a solicitor look at the contract beforehand, right?

Within Victoria there is no cooling-off period following an auction. For properties sold in private sales the cooling-off period is three days. So what happens after an auction then? You will need to sign the contract with the seller present following any discussion about changes to the contract conditions (such as settlement time). You will then need to pay the deposit specified in the contract or as otherwise discussed.

What about moving in?

Oh, that’s a whole other kettle of fish but we’re here to help. Visit read all our moving tips here.