What First Home Buyers Need to Know About Purchasing a House

Understanding Your Position as a First Home Buyer

Buying your first home represents one of the most significant financial decisions you'll make. As a first home buyer in Canberra, understanding the process and knowing what resources are available can help you move from renting to owning your own property with confidence.

The journey to homeownership begins with understanding your financial position and the various home loan options available to you. From deposit requirements to government schemes, there's much to consider when preparing to purchase your first house.

Determining Your First Home Buyer Budget

Before you start attending open homes, establishing a realistic first home buyer budget is essential. This involves assessing your current financial situation, including:

• Your savings for a deposit
• Regular income and employment stability
• Existing debts and monthly expenses
• Potential borrowing capacity

Your deposit amount will significantly influence your loan options. Whilst traditional home loans require a 20% deposit, there are low deposit options available for eligible first home buyers. You can purchase with a 5% deposit or 10% deposit through various schemes, though you may need to pay Lenders Mortgage Insurance (LMI) to protect the lender against default risk.

Some first home buyers also receive help through a gift deposit from family members, which many lenders accept as part of your contribution, subject to specific documentation requirements.

First Home Buyer Eligibility and Government Support

Understanding first home buyer eligibility criteria helps you access valuable government schemes and concessions. In the ACT, first home buyers may qualify for:

First Home Owner Grants (FHOG)
The Australian Capital Territory offers financial assistance to eligible first home buyers purchasing or building a new home. Eligibility requirements typically include being an Australian citizen or permanent resident, being at least 18 years old, and not having previously owned property.

First Home Buyer Stamp Duty Concessions
Canberra first home buyers may receive concessions on stamp duty, reducing the upfront costs of purchasing a property. These concessions can save thousands of dollars and improve your purchasing power.

First Home Loan Deposit Scheme
This government initiative helps eligible first home buyers purchase a home with just a 5% deposit without paying LMI. The government provides a guarantee to participating lenders for up to 15% of the property value.

Regional First Home Buyer Guarantee
For those considering properties in regional areas, this scheme offers similar benefits to the First Home Loan Deposit Scheme, supporting purchases outside major metropolitan areas.

Exploring Home Loan Options

When you apply for a home loan, you'll encounter various products designed to suit different financial situations. Understanding these options helps you choose the right first home loan for your circumstances.

Interest Rate Options
You'll need to decide between a fixed interest rate, variable interest rate, or a split loan combining both:

• Fixed interest rate: Your rate remains constant for a set period (typically 1-5 years), providing certainty with your repayments regardless of market changes
• Variable interest rate: Your rate fluctuates with market conditions, potentially offering interest rate discounts and greater flexibility with features like offset accounts and redraw facilities

Loan Features to Consider
Modern home loans offer various features that can help you save money and manage your mortgage effectively:

• Offset account: A transaction account linked to your home loan where the balance reduces the interest charged on your mortgage
• Redraw facility: Allows you to access extra repayments you've made on your loan
• Repayment flexibility: Options to make additional repayments to reduce your loan term and interest costs

The Home Loan Application Process

When you're ready to apply for a home loan, understanding the first home loan application process helps ensure everything progresses smoothly.

Getting Pre-Approval
Before you start house hunting seriously, obtaining pre-approval provides several advantages. This involves a lender assessing your financial situation and indicating how much they're willing to lend you. Getting loan pre-approval demonstrates to vendors that you're a serious buyer and helps you understand your budget limitations.

First Home Buyer Checklist
When preparing your first home loan application, gather these essential documents:

1. Proof of identity (driver's licence, passport)
2. Income verification (payslips, tax returns, employment contracts)
3. Bank statements (typically 3-6 months)
4. Details of assets and liabilities
5. Evidence of your savings history
6. Credit card statements and loan documents
7. Rental payment history

Understanding Lenders Mortgage Insurance (LMI)
When borrowing more than 80% of the property value, lenders typically require you to pay Lenders Mortgage Insurance (LMI). This protects the lender if you default on your loan. The cost varies based on your deposit size and loan amount, potentially adding thousands to your upfront costs.

However, some options can help you avoid paying LMI. These include saving a larger deposit, using the First Home Loan Deposit Scheme, or having a family member act as a guarantor.

Additional First Home Buyer Schemes

First Home Super Saver Scheme
This scheme allows you to save money for your first home inside your superannuation fund. You can make voluntary contributions to your super and later withdraw these (along with associated earnings) to use toward your first home purchase. This provides tax advantages that can help you save faster.

Making the Right Choice for Your Situation

Every first home buyer's situation is unique. Your employment type, income sources, credit history, and long-term goals all influence which loan products and strategies suit you best suited to your needs.

Consider whether you're buying an apartment or a house, as this affects property values, ongoing costs, and potential growth. Location also matters significantly - properties in Canberra's inner suburbs typically cost more but may offer stronger growth prospects and lifestyle benefits.

Working with a Mortgage Broker

A mortgage broker can help you move through the complexities of buying your first home. They have access to multiple lenders and can compare home loan options to find products that match your needs. Brokers understand first home buyer eligibility requirements, government schemes, and can guide you through the entire first home loan application process.

At Simple Lending, we specialise in helping Canberra residents achieve their homeownership goals. We understand the local property market and the specific challenges first home buyers face in the Australian Capital Territory.

Taking Your Next Steps

Purchasing your first house requires careful planning, but with the right information and support, homeownership is within reach. Start by assessing your financial position, researching available properties in Canberra, and understanding which government schemes and home loan options you qualify for.

Remember that preparing thoroughly before you apply for a home loan increases your chances of approval and helps you secure favourable terms. Take time to build your savings, improve your credit score if needed, and gather the required documentation.

Ready to start your journey to homeownership? Call one of our team or book an appointment at a time that works for you. Our experienced mortgage brokers are here to help you find the right home loan solution for your first property purchase in Canberra.