First Home Buyer Guide | First Time Home Buyer Tips

Are you a first home buyer and have no idea where to begin? Our guide will show you all the basic information you need to know and kickstart your home loan journey.

A guide to buying your first home

It’s the dream of many Australians to buy their own home. As far as big life goals, for many people it’s up there with getting married and/or having a baby. As such, it requires a considerable amount of thought. And, as many first home buyers will attest, they wish they’d started saving yesterday. But how much deposit do you actually need to buy that dream home, and what’s a safe amount to borrow from the bank? Let’s take a look at some of the big questions.

Related topics

How much will I need for a house deposit?

In Australia, most banks and lenders will require you to have saved 10% of the property’s value before you qualify for a home loan. This means if you’re eyeing a pad listed for $600,000, you’re going to need a deposit of at least $60,000. The more you have, the better off you’ll be – for a number of reasons, which we look at below. First things first, decide where you want to buy and do your research on the property market. Speak to real estate agents about how much properties are selling for in the area you are looking to buy and work out if you can afford to buy there.

What is lenders mortgage insurance?

Most lenders require you to have a deposit of 20% if you wish to avoid paying Lenders Mortgage Insurance (LMI). Lenders take out LMI to protect themselves in case the borrower defaults on the loan and is generally paid by the lender if their Loan to Value Ratio (LVR) is 80% or higher. The cost of LMI usually depends on your LVR, the amount of money you borrow and the lender but in the example above you should expect to pay somewhere between $10,000 and $15,000.

What is my loan-to-value ratio?

The more deposit you have saved, the lower your LVR will be. The LVR is worked out by dividing your loan amount by the value of the home you wish to buy. Anything over 80% automatically puts you in Lenders Mortgage Insurance (LMI) territory. For example, if you want to buy a $600,000 home with a 10% deposit your LVR will be 90%. If you have a deposit of $150,000 for the same home, the loan amount will drop to $450,000 which in effect drops the LVR to 75% and means there is no LMI payable.

The lower your LVR (under 80%), the higher you are valued in the eye of the lender, meaning you may be eligible for a greater variety of home loan rates. The lower the rate you pay on your home loan, the less interest you’ll pay back to the lender over time.

What if I only have a 5% deposit?

The smaller your deposit, the more rigid the regulations are on it, however some lenders will accept a deposit of only 5%. If you only have a 5% deposit, be aware that this needs to comprise “genuine” savings. Genuine savings are savings you have in the bank that show up on your bank statement – not “oh but my brother owes me $10,000 which I’m getting any day now” savings. Money from a parent or third party can also be put towards your deposit, but this is referred to as a gift rather than genuine savings.

If you’re buying an investment property, lenders tend to be more strict, with most requiring a deposit of at least 10% of the property’s value.

Can I buy a property with no deposit?

If you haven’t saved a deposit at all – not even a teeny tiny one (seriously, did I really spend that much on New Year’s Eve tickets in the nineties?!), you’ll need to qualify for what’s known as a guarantor loan. A guarantor is usually a family member who is legally responsible for paying back the entire loan if you can’t – as well as any fees, charges and interest.

You can read more about guarantor loans

How much can I borrow?

Once you’ve worked out how much deposit you have, you can start working on how much you can borrow. The amount you can borrow is determined by a number of factors, including your income (and whether you work full time, part time or casually), marital status, the number of dependents you may have, your credit score and expenses.

UNO’s range of
are designed to help you figure out your borrowing power, the funds required to buy a certain home and the cost of other things like stamp duty.

Let’s say you’re a single person earning $80,000 a year. You hold a credit card with a $5,000 limit, and your living expenses amount to around $1600 a month. UNO’s home loan
will estimate your borrowing capacity somewhere between $400,000 and $500,000.

Now let’s say you’re a couple with two children, with a combined salary of $200,000 and living expenses of $2500 a month. You also have a credit card with a limit of $15,000. Your borrowing capacity now is somewhere between $1,000,000 and $1,250,000.

Have a go with the

How much should I borrow?

borrow.

As well as the amount you’ll need to save for your deposit, you’ll also need to factor in the other costs that come with buying a house, including stamp duty, council and water rates, and any repairs you may need to carry out once you move in. It’s a good idea to save for these things along with your deposit.

When factoring in how much you can afford to borrow from the bank, you should also keep in mind that interest rates may rise, and your repayments will go up. You should also think about future plans and aspirations. Do you plan to study in a few year’s time and quit your job – or work part-time? Do you plan to retire at 60? 50? 40?! Do you see children in your future? Are your parents likely to need care and assistance as they age?

While these things cannot be put into a calculator (yet), they should be taken into account. If you don’t want to find yourself thousands of dollars in debt in 30 years time, set your limit and don’t overcommit.

How much is stamp duty?

One of the major hurdles to buying property for first home buyers can be the high cost of stamp duty. On top of the stamp duty fee itself, there’s also the transfer fee and a mortgage registration fee – although these are only a couple of hundred dollars rather than the thousands you’ll pay in stamp duty.

Thankfully, there are a number of stamp duty concessions for first home buyers in different states.

Read

Can I get the First Home Owner Grant?

The criteria for each grant and the value of the grant varies from state to state, although the main eligibility requirements are largely the same: you must be 18, an Australian citizen or permanent resident, and you mustn’t have owned property in Australia before.

For a breakdown of key criteria in each state read:

The pre-approval process

You’ve just received pre-approval for your home loan. Congratulations! You must be feeling pretty excited. Now it’s time to find that dream home.

While you do, here are a few tips to ensure you keep that pre-approval.

Pre-approval does not include assessment of whether the property is acceptable to the lender – because the property most likely hasn’t been found yet. This is why one of the conditions in the pre-approval will be “subject to a satisfactory valuation”.

Avoid these property types

Before you go house hunting, you should know there are certain types of properties that may not be acceptable to some lenders, such as:

  • Small apartments or particular apartment blocks deemed harder to sell
  • Hobby farms
  • Properties in suburbs that are deemed ‘high risk’ by a lender. A suburb is deemed high risk when there are a lot of high rise developments, for example. In areas with high density there is the risk the oversupply will drive the prices down if the market crashes. Lenders need to make sure that if they need to sell the security (the property purchased and held by the bank to sell in case you can’t pay the loan back) to repay their debt they will get the value of the debt back.
  • A property with large power lines close to it which could affect the resale value
  • A property that is in poor repair

Don’t go changing your job

Once you’ve gained pre-approval, now is not the time to go changing jobs. If your circumstances do change between gaining pre-approval and finding a property you’ll need to advise UNO.

Please keep in mind the following changes in your personal or financial circumstances can mean you are no longer able to afford the repayments and the lender may not formally approve your loan.

Examples of changes that could create an issue are:

  • Changing jobs
  • Going part time or becoming a contractor
  • Increasing your number of dependents
  • Getting a credit card or personal loan
  • Spending your deposit on an emergency expense
  • The lender finding out about loans or credit cards you did not disclose
  • Interest rate changes. If the RBA increases rates while you are still house hunting it could affect the amount you are able to borrow
  • Formal pre-approvals can negatively affect your credit score so beware of obtaining multiple pre-approvals with different lenders.

Once you get pre-approval

Don’t be tempted to spend more than the amount you have been pre-approved for. If you lock yourself into a binding contract before seeking legal advice it could cost you your deposit if you are not able to obtain formal approval for a higher loan.

Understanding home loans

Once you’ve saved your deposit and decided where to buy, you’ll need to apply for a home loan. The home loan process can be complicated, which is why we invented UNO – to take the hassle out of applying for a home loan.

‍

Book Call Now

UNO home loans

Need help with your home loan?

UNO Brokers are available night and day for a quick review or your situation and bring expertise that will support better decision making that will save you time and money. Book in a quick call when it suits your busy schedule

Get Started
Try Plans, by UNO
Mortgage calculators completely reimagined
Get Started

Related Articles

TESTIMONIALS

What our customers are saying

Kyle Richards
October 10, 2024
Absolute legend, helped me through the first home buyers scheme, explained everything in a way that made sense, was very knowledgeable and a joy to work with.
Read more
Chloe S
October 8, 2024
Mike Parsons made it possible for us and the in laws to get 2 pretty complicated home loans. He helped us through everything and we'd be happy to use Mike and the team again for anything we needed. Thanks again!
Read more
Sam Rezai
October 2, 2024
I have gone through 6 different mortgage brokers prior to meeting Andrew Wyers. He is the most patient mortgage broker I’ve encountered and also the most knowledgable about the bank’s lending process and products available. It took me 1 year to find a house I was happy with and Andrew was always there to assist with any issues or questions I had; he always return my phone call, even on the weekends or when his away on holidays. The loan process was smooth and I had no complications. The process with Andrew was again nice and easy, he took the time to find and put together the right package that was suited to my situation. I have recommended Andrew to my family & friends and everyone have been grateful and completely satisfied with his service.
Read more
S Wilko
September 23, 2024
I had not dealt with Scott or UNO before finding them on the internet. Even as an Australian citizen living and working overseas, I knew obtaining a loan would be difficult. However, Scott went above and beyond what I expected from a mortgage broker. I genuinely don’t think you could find another company that works as hard as they did to get my home loan approved. I cannot recommend them highly enough. Everyone I dealt with at UNO were extremely professional and helpful. If you are looking for a broker, you would be mad not to give them a go. Thanks to Scott Wilkinson, Dalby Bajwa, Jena Lasquite and Andrew Pacini. Shaun.
Read more
Shan Liao
September 3, 2024
I had an outstanding experience with Tian Liu. He was incredibly professional and attentive, going above and beyond to meet my needs. His expertise and dedication made the entire process smooth and stress-free. Tian's deep knowledge of the market and commitment to finding the best solutions for his clients truly sets him apart. He was always available to answer my questions and provided invaluable guidance throughout. I highly recommend Tian Liu to anyone in need of a reliable and skilled broker!"
Read more
Nathanael Chin
September 3, 2024
Tian Liu provided exceptional service throughout the entire process. His professionalism and keen attention to detail were evident from the start. Tian consistently kept us informed and offered insightful advice that made us feel confident in our decisions. He truly cares about his clients and works tirelessly to ensure the best possible outcome. We couldn't be happier with his assistance and highly recommend Tian to anyone looking for a trustworthy and knowledgeable broker.
Read more
Patrick Winters
August 14, 2024
For the past three years, it has been an absolute pleasure to work with Mike Parsons. He has consistently helped us navigate commercial property loans with skill and efficiency. Mike’s timely and professional responses to our inquiries have been invaluable. We have built a strong, reliable relationship with him and eagerly anticipate continuing our collaboration in the future. We highly recommend his services.
Read more
Lee Robibaro
August 6, 2024
I am so thankful and grateful to have Scott Wilkinson as my broker. He not only looked after me every step from start to finish he gave me confidence and I was able to trust him and his expertise. My children and I are now happy in our new home and very appreciative of Scott's help. I will definitely be only having Scott as my broker from here onward as there is no mucking around and straightforward answers. Thanks again
Read more
Steve Mav
August 6, 2024
Scott and the whole team at uno have been amazing. Super responsive and helped us achieve a result that we couldn’t have possibly achieved on our own.
Read more
Thien Pham
August 5, 2024
Scott, Dalby and Jena were awesome to work with for my recent Home Loan, they are responsive and knowledgeable - which helped ensure a smooth purchase from pre-approvals to settlement. This is the second property I've purchased with UNO as my mortgage broker and would definitely recommend their services. Thanks again to the UNO Team for the awesome support.
Read more
Scott Hutchinson
August 5, 2024
I am writing this summary in support of recommending Mike Parsons as a Mortgage Broker. At the time of writing this, I have known Mike for 4 years and he has executed 4 mortgages deals for me (including 2 refinances) over that time. Mike has provided me incredible service as a mortgage broker as follows : - Works painstakingly on getting the scenarios together to provide you options that optimize your position. - Works inordinate hours on the detail necessary to support the scenarios. - Mike keeps you updated on the status and progress of the applications and also helps you work through answering questions and any complexities that may arise. -In my cases, given the complexities and timings of my situations , these application processes would take many weeks to finalize . Mike never gave anything other than utter commitment and focus to getting the job done. Mike acts as a true business partner throughout this whole broker /mortgage journey. I simply would only go to Mike for any future dealings on getting a loan from a bank (and as will my kids in the future !) . There is no way a bank (I have seen anyway) would provide this kind of time nor service to a customer. You can rest assured that once Mike has done the deal, you have ended up with the most optimized position taking into account all the variables/scenarios in play. Scott Hutchinson
Read more
Jason Seam
August 5, 2024
I've worked with Scott Wilkinson for my last 2 properties and he's been excellent. He sourced multiple options and didn't push a specific bank, tailoring his recommendations to me based on my requirements. I was specifically requesting a "medico loan" and Scott could navigate that extra requirement with expertise. When I was initially working with Scott, I was also trialling 2 other brokers and neither of those 2 had the same breadth of lenders, or could provide the same deals. I've referred multiple buyers to Scott and his team; one of them said to me after working with him, "how'd you find this guy, he's so good compared to all the other broker's I've worked with!" I'm going into my next purchase with Scott as my broker partner again. I recommend him to everyone
Read more

Try Plans by UNO

Mortgage calculators completely reimagined
Get Started