First Home Owners - Buying & Borrowing Tips Guide

Tips, For First Time Owners

Buying your first home can be a nerve racking experience. The rewards of investing in your own home are certainly worth it. Covered in this section are:

1. Your First Home Purchase Price

2. Stamp Duty

3. Home Loan Establishment Fees

4. Mortgage Registration

5. Lenders Mortgage Insurance

6. Building, Survey and Pest reports

7. Conveyancing (the legal costs)

8. Strata Fees & Levies

9. First Home Purchase Analysis

First Let's Settle The Butterflies

To settle your first home buyer's

butterflies and to take the guess

work out of becoming a first time

home owner, I have put together

these First Home Owners Tips

for you.

It's a bit like a cheat sheet for buying your first home, though when we leave school we don't call it cheating anymore, we call it teamwork.

These tips come from my experience in the property and home loan business over the past 8 plus years. In that time I have helped hundred and hundreds of people get their finance right, from first time owners to seasoned property investors, and along the way developed a safe, simple process that I believe will help you get more of what you want from your new home.

Back to School Again

Firstly thing to do is your homework, decide what you want from your first home. Do you want a free standing home on a 600 square meter block of land or would you prefer an apartment or townhouse.

Will two bedrooms be enough or do you need more, what suburb do you want to live in. Is it important to be close to schools, shops or public transport? Is the area you are looking at somewhere you would be happy to live for the next 5 to 10 years? Answering these types of questions will help you get a clear picture of the kind of home you are looking for. (You can download my First Home Owners Checklist to make this easier)

I would recommend you use the internet, newspapers and magazines to help with your research. Talk with a lot of real estate agents and don't be afraid to ask them any questions. A good agent won't mind being quizzed like this, it's their job and if they are not helpful with answering your questions this may be early warning that they are not the right agent for you. There are plenty of great estate agents who will be happy to help you.

Do It Like A Property Investor

Many wise property investors use a method I call the "100-10-3-1 Rule".

How this works is that you look at 80 to100 homes that you like and meet your selection criteria. You make offers on 8 to 10 of these properties and out of these offers you can expect 3 vendors to be interested in talking with you.

Now that you have narrowed down the field your chances of getting exactly the right first home is greatly improved. You will be much more confident your choice of home meets your needs as well as your price.

Now this may sound like a lot of work extra work and you know it is. Using this method, even if you only look at 20 or 30 properties will give you a far better chance of finding the right home and paying a fair price for it. A little extra work now will save you years of unnecessary aggravation later on.

The 100-10-3 Rule is also great way to educate yourself for the market you want to buy into, and you will be more confident that you're making a good choice when the time comes.

Use the Head Not The Heart

Try to make the whole process of buying your first home as systematic and as non emotional as possible. Where many first home owners often get into trouble is that they look very few homes and fall in love with one of the first homes they see.

There minds are made up early and they convince themselves that there are no other homes out there that will suit them (and of course this is nonsense), this type of approach often leads to people paying way too much for their first home, all because they let the heart rule there head.

You Set The Price of Your First Home

Having done your research, you can set your own rules for what you want. Don't be afraid to submit an offer on a home you like less than the asking price, the worst thing that will happen is the vendor will say no… (you have to kiss a few frogs to find a prince (or princess))

Buying your first home will require a little negotiation on your part, remember all vendors will expect you to make an offer, the asking price is what they hope they will get. The listed price are only figures pulled out of the air by the real estate agent and the vendor, you as the buyer sets the real price.

Let's Talk About the Costs Of Owning

Your Own Home.

3. Loan Establishment Fees: Many Lenders charge a set up fee for you to apply for a home loan, these vary from lender to lender and will cost about $600 to $800 as a rule of thumb. It is to cover the cost pf processing your application as well as pay for a property valuation.This fee is normally refunded if your home loan application is unsuccessful.

(I can usually organise a Cash-Back (or a Zero Loan Establishments fee) on your loan start up costs depending on the lender you choose and your situation).

4, Mortgage Registration: This is a charge made by the Government to register your mortgage document and costs about $180 depending on which stat e you purchase your home.

5. Lender Mortgage Insurance: This is one of the major costs involved with buying a home and is not to do with your property purchase so much as it is your home loan. Lenders Mortgage Insurance, often referred to as LMI or Lenders Risk insurance is an insurance policy that the lender takes out to protect themselves from you the borrower not paying your home loan back.

The policy only has one instalment which is a one of fee required when the loan is established.

Almost all standard mortgages LMI once the mortgage amount is greater than 80% of the property price. This ratio is called the L.V.R. or Loan to Value Ratio.

For example the LVR on a property valued at $100,000 with an $80,000 mortgage has an LVR of 80%.

So LMI raises in cost the higher the loan to value ratio becomes. On a 100% home loan for instance the LMI premium will be about 2.96% the value of the property for a first home owner. For a property priced at $300,000 the LMI premium will be about $8,850. A lot of money and a significant part of the purchase costs.

6. Building, Survey and Pest reports: These will ensure the structural integrity of the property you intend to buy as well as a guarantee the boundaries are in the correct place and ensure it's free from pests like termites etcetera.

The cost of these reports will be around $800 but they can potentially save you thousands of dollars in avoidable repairs and problems. They will often appear as part of your legal costs.

7. Conveyancing: Or the legal costs to consider when purchasing a property mainly centre around what is know as conveyancing, this simply refers to the transfer of the property from one person to the other. The cost of conveyancing varies from state to state but as a guide expect to pay between $1,000 to $1,500 for professional help.

8. Strata Fees & Levies: If you are buying a unit or townhouse there will also be strata fees, these fees are to pay for the upkeep on the building and the grounds. Common property like swimming pools and elevators are maintained by the strata fees.

Council Rates and Home & Contents insurance should also be considered here, though these are ongoing costs that will happen every year and are not really part of the purchase costs.

Now let's look at a real life example of a first home purchase priced at $298,000 (See the First Home Analysis below). As you can see from the First Home Analysis, the weekly repayment on this example id $504 per week.

Now I appreciate that this may sound like a lot, though if you are currently renting at say $350 per week and think you can manage another $154 per week by budgeting or redirecting your savings into a home loan you are on your way to owning your first home. And remember you can do this with absolutely zero deposit.

Your first home can be yours without you needing one cent to start. All the funds can be borrowed and you do not have to pay a higher than normal interest rate to make it happen.

If you want to chat about owning your first home, give me a call at HunterWide Home Loans or send me an email (the link is below) . Please include your name, a contact phone number and a good time to reach you and I call you as soon as I can and help you become a home owner too, it is easier than you think.

All the very best to you and finding your new home.

Jamie Wadley

HunterWide Home Loans