As a first home buyer, trying to wrap your head around the home buying process can be overwhelming. And with so much information available you may not know where to start.
If you are looking to purchase your first home, it’s important to get the facts before you start. Listed below are the top first home buyer myths that we have busted.
- You need a 20% deposit to take out a home loan
Saving for a home loan deposit is one of the biggest hurdles for first home buyers. A lot of people talk about having a 20% deposit which is calculated by multiplying the purchase price by 20%. Although this is a great position to be in and allows you to avoid having to have mortgage insurance, this is not the only option.
Most lenders offer home loans up to 95% of the purchase price, which can help you get into the property market sooner, especially if you have found your dream property before reaching a 20% deposit. This means that your deposit amount could be as little as 5% of the purchase price.
The downside however, is if you borrow more than 80% of the value of the property, lenders mortgage insurance will probably apply thousands of dollars and is added to your loan. Lending a higher proportion of the purchase price can have other ramifications like a higher interest rate and a tighter criteria around employment and savings history.
- I can’t afford an investment property
As a first home buyer, you can purchase a property to live in or as an investment. Many first home buyers have found that buying an investment property first has been more beneficial.
Buying a first home as an investment can have long term benefits and help put young Australian’s in a better financial position. For example, you can continue to live at home and save on living costs and the rental income you receive can be used to assist with loan repayments.
- I only need money for the deposit
A home loan deposit is just one of several costs involved when purchasing property.
Many first home buyers get caught out thinking that they only need to save for a deposit and have missed out on a property because they did not have funds to cover the other costs.
Other purchase costs you will need to consider include:
- Stamp Duty
- Pest and Building Inspections
- Moving Expenses
- Solicitor and Conveyancer Fees
- Loan Establishment Fees
- I have a bad credit history, so I can’t get a loan
It is a common mistake to assume that a default on your credit report means that you will not be approved for a home loan. But this is not necessarily the case. Many lenders now provide loans that are specifically designed for borrowers who have a bad credit history.
When looking for a home loan, it is important to not assume that all lenders are the same when it comes to bad credit. For some lenders, the story behind your bad credit issues are very important and they will look at your individual situation to provide a solution to suit.
If you are not sure whether you have a default on your credit file or not, now is the time to check. Visit My Credit File to receive a copy of your credit file today.
When purchasing your first property, visit a lender once your deposit strategy is underway, so that your expectations for home ownership can be transformed from a dream to reality.
And of course, keep an eye on the property market. Research seriously once you have saved around 5 per cent of the purchase price and have an idea of what and where you want to buy.
At Hicks Real Estate we are a professional and dedicated team of professionals, here to help you with any of our first home buyer questions and property guidance.
For more information please call us today on: 07 3355 6845.
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Hicks Real Estate Team
Hicks Real Estate is a Brisbane based, full-service real estate agency supporting buyers and sell as well as renters and property investors. With almost 20 years experience in the local market, we are the real estate experts you can rely upon.
