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Buying your first home is one of the biggest steps you will ever take. It can all seem overwhelming at first but with the help of a Creative Finance consultant you can rest easy and get back to the joy of buying your own home with total peace of mind.

Where to Begin?

It is important that you start by understanding more about mortgages and how they work. We recommend you familiarise yourself with our Types of Loans and Tips & Traps sections. Also, if you do not have at least a 20% deposit plus costs, then we recommend you read our sections on Lenders Mortgage Insurance and Family Pledge Loans.

Once you have familiarised yourself with the basic loan types and concepts you are now ready to take your first steps to obtaining the right mortgage for you. It is important for you to consider the following:

• Do you have an acceptable deposit?
• Is it possible to get 100% loans?
• How does loan servicing work?
• Are you eligible for the First Home Owners Grant (FHOG)?
• How much can you borrow?
• What will your repayments be?
• What else do you need to know?

Do you have an acceptable deposit?

What qualifies as an acceptable deposit depends on which of the following 2 categories you fall in to:

1. Less than 10% deposit – if the amount of funds you have, including the FHOG, is less than a 10% deposit then as well as loan serviceability you will also be required to show that over a 6 month period you have been able to save regularly and have saved 3 to 5% of the purchase price yourself. Without this 3 to 5% genuine savings Lenders Mortgage Insurers will not insure the loan and the lender will not be able to approve it.
   
   
2. 10% or more deposit – If the total of FHOG and gifts is equal to 20% or more of the purchase price or you have used a Family Pledge then Lenders Mortgage Insurance is not required. You still need to be able to show that you can service the loan.

Is it possible to get 100% loans?

Some lenders now offer 100% loans without genuine savings. To qualify for this sort of loan you need to be able to demonstrate a clear financial benefit in doing so. When does this occur?

The best example of this is where the rent you have been paying for at least the last 12 months is lower than the mortgage repayment you will need to make on your 100% loan. This is acceptable because you have shown you can effectively maintain a higher level of regular payment and by taking the mortgage you will actually be saving money on a month to month basis. Of course usually for this situation to occur you have been renting a property that is either much larger or in a much nicer area and have been willing to downgrade so that you can own your own home.

How does loan servicing work?

Irrespective of your deposit you will still need to show that you can service the loan. The only exception is that some lenders will let another family member provide an income support guarantee. There are legal issues in doing so. For further information you should read the Family Pledge Loans section.

Are you eligible for the First Home Owners Grant (FHOG)

In order to check that you are eligible for the FHOG in your State or Territory we recommend that you go to the following website:

http://www.firsthome.gov.au/

Once on the site select your State or Territory and click on the ‘Eligibility Checklist’ button and answer the questions asked to determine your eligibility.

How much can you borrow?

Whilst there are many simple calculators available they can be very misleading. We recommend that you talk to one of our Creative Finance consultants to obtain a much clearer idea of what you could borrow versus what you can afford. They can then also help you obtain a pre-approval so that you can concentrate on finding a property with confidence of both your price range and that the finance is available.

What will your repayments be?

In order to get a feel for what your repayments will be for different loan sizes we recommend you use the Loan Repayment Calculator in our Calculators section. Remember that for owner occupier loans, especially if you intend to claim the FHOG, then you will be required to take Principal and Interest (P & I) repayments.

What else do you need to know?

If you are confident that you have answers to all the above questions then you are now much more prepared to buy your first home to live in. If there are any finer points you wish to discuss or more unusual questions you might have then we recommend you speak to a Creative Finance consultant.