9 tips for securing a home loan as a first homebuyer
Are you ready to build your first home but you’re unsure where to start?
Home ownership may be easier and more affordable than you think – the secret is setting yourself up for success.
‘Home ownership can provide stability and a sense of security, allowing you to build equity and plan for your future,’ says Laila Khoury, a Mortgage Broker and construction loan expert with Homebuyers Centre’s in-house Resolve Finance team.
‘As a mortgage broker, we educate first homebuyers on how to get themselves into a new home faster. We can provide advice on how to become finance fit including how to improve your savings / deposit and balancing your budget. We can also compare lenders and products to find one that is aligned to your specific needs.’
Still want to do a little research for yourself? Below, Laila offers her top tips for securing your first home loan:
1. Work out your budget and stick to it
Sticking to a budget will not only help you save a deposit, but it will also demonstrate to lenders that you know how to manage your behaviours and your cash. Lenders will look at your income, expenses, and savings. So, write down your regular expenses, including rent, food, bills, and streaming services. Then, find out where you can make manageable cuts to your discretionary spending, such as uber eats, drinks out and the number of streaming services being used / not used.
‘Decide how much you can realistically afford to save each pay. Put that amount into a -interest bearing account and don’t touch it. Regularly depleting your savings may signal to lenders that you won’t be able to service a loan,’ says Laila. ‘It’s all about demonstrating positive habits – consistently!’
2. Ensure you have a healthy credit score
Your credit score shows how well you manage your credit. Although there are lenders available that may consider a lower credit score the higher your credit score, the better for your home loan application.
Factors that impact your credit score include:
- How well you meet payment deadlines: Any missed or late payments or repayments may decrease your credit score.
- Not managing the amount of credit you have: Try to keep the amount you owe below your available limit and make sure any re-occurring payments are made at the lender stated times.
- Your credit mix: Having a good mix of credit shows the bank you can juggle different types of credit.
- How long you’ve used credit: Have you been using credit (well) for a long period of time? This is a green flag to lenders and may promote a positive credit score.
- How often are you seeking new lending: Are you applying for too much lending at one time? This can also lower your credit score and lenders may think you’re in financial strife.
3. Research first homebuyer initiatives
‘Depending on the state you are building in, there may be concessions available for first homebuyers,’ says Laila.
In Victoria, this includes the Government’s First Home Owner Grant (FHOG). The FHOG provides $10,000 to any first homebuyer buying or building a new property that has never been lived in. Find out if you are eligible for the FHOG via the .
There are several other federal government schemes that you may be eligible for including the First Home Guarantee | Housing Australia.
4. Save for at least a five per cent deposit
The larger your deposit, the more likely it is that you’ll secure a home loan. So, start saving for your home loan deposit early. ‘Small, consistent savings can make a significant difference when it’s time to buy your first home,’ says Laila.
That said, gone are the days when you needed to save a hefty 20% of your property’s purchase price. Thanks to the Government’s First Home Guarantee (FHBG) low deposit home loans, you can now break into the property market with as little as a five per cent deposit.
‘Under the FHBG, up to 15% of your home loan is guaranteed by the Government’s Housing Australia. This means you only need to provide a five per cent deposit and you won’t need to pay Lenders Mortgage Insurance (LMI),’ explains Laila.
‘A significant portion of first homebuyers who are benefiting from the FHBG are purchasing a home on their own.’
5. Pay off high-interest debts
Lenders will thoroughly examine your debts to evaluate if you could manage a home loan, however not all debts are created equal!
Lenders will usually scrutinise higher interest debts including credit cards, store cards or short-term payday types of lending.
6. Reduce your ATM and PayPal spending
Before a lender approves your loan, they will want to see your l transaction statements from either the past three to six months. Where a large amount or value of ATM withdrawals is identified they may require further information before making a decision.
7. Close your ‘buy now pay later’ services
Despite being interest-free loans, this type of lending may impact your loan application or the amount you’re able to borrow.
What’s more, if you accidentally miss a repayment, it may impact your credit score. The best thing to do? Close these services and pay for larger expenses the old-fashioned way – by saving up and then paying in cash!
8. Plan for additional expenses
Lenders will look favourably on someone who is organised. So, prepare and save or look for lending solutions that may assist in covering the additional costs of homeownership – not just your deposit. This could include:
- Stamp duty: Stamp duty is the fee you pay when transferring land or property to a new owner. The good news? First homebuyers may be eligible for an exemption or reduction. More details can be found on the State Revenue Office Victoria website.
- Lenders mortgage insurance (LMI): If your deposit is below 20%, you might need to pay LMI to offset the risk for your lender. The amount you will need to pay will depend on your loan amount compared to the value of your property. Your broker will be able to provide you with an estimate before you sign on the dotted line.
- Building inspections:You’ll want to make sure your new property is in good condition. Put a little money aside to pay a qualified building inspector.
- Application fees:Home loan application fees will depend on the product and bank you choose. Your mortgage broker will be able to weigh up the best options for you.
- Conveyancing / Legal fees:Buying a home involves the creation and filing of legal documents, with legal and conveyancing fees attached. Make sure you put a little extra money aside to cover these costs.
9. Remain realistic and do your research
A house is a long-term investment in your future, so be sure to do your research and keep your expectations in check.
‘Your first home may not be your forever home but it’s a vital first step in setting up your long-term financial stability,’ says Laila.
‘Your first home is a learning experience – so don’t be afraid to ask lots of questions. Maybe most importantly, don’t settle for the first mortgage option! Work with a broker to weigh up your options and find the ideal mortgage option for you.’
Are you ready to build your first home? With finance, land and home all in the one place, Homebuyers Centre can make your first home happen.
Reach out today to one of our friendly New Home Consultants to find out how we can get you first home ready.