Four insider tips for buying your first home

Estimated reading time
 5 min

In this article

• Four essential steps most first-home buyers take when buying their first home.
• Different government first-home buyer schemes that can help you out.

We do so much in our homes. We study at kitchen tables, window shop online from our couches, or do leg day in the garage-gym.

So, it’s not surprising if the idea of buying your first home feels, well, huge. Whether it’s your forever castle or just a stepping stone to bigger and better things, you want to be sure you’ve picked the right home for your unique circumstances, and there’s a lot there to consider. From choosing your ideal location to finding the right loan for yo, our guide to buying your first home explores four steps most buyers take, so you can go forth and own with confidence.

Step 1: Get a clue on your costs

Get your deposit

Saving for a deposit is usually your first step in buying your first home and a good rule of thumb is to aim for at least 20% of the total home value. While you can technically purchase with less, you will be hit with Lenders Mortgage Insurance (LMI) for most deposits under 20%, so it’s ideal to avoid that extra cost if you can. Remember, everyone gets there in their own time. You can make use of our savings calculator to get clear on your personal goals or get additional guidance on creating good habits in our savings guide.

Avoiding Lenders Mortgage Insurance

Lenders Mortgage Insurance (LMI) is a one-off fee that protects the lender if the borrower defaults on their home loan. The amount of LMI you pay is calculated based on the size of your deposit. Having a 20% deposit saved is one of the best ways to avoid it.

However, if you want to buy before you have a 20% deposit saved and hop on the property ladder sooner, your parents might be able to use their own property's value to get you in the door with a smaller deposit and no LMI. Your parents will become a guarantor of the property because they’re guaranteeing a loan for you. An alternative is a cash gift from parents to help bridge the gap to a 20% deposit and purchase costs. It’s not possible for everyone, but sometimes helping out is what family is for, right ?

It’s good to be aware as well that certain professions (like nurses, medical practitioners, legal professionals and accountants, for example) can also qualify for a LMI waiver so all they would need is a 10% deposit and to cover purchase costs. If you think you might qualify, view the fact sheet here for more.

While LMI has a negative connotation, the upside is that you can enter the market sooner, rather than later. This could be the difference in buying now or buying 12+ months.

Hidden costs

There are some sneaky hidden costs you should be aware of, so it’s smart to suss these out and make a budget for them on top of your deposit. They can include:

• Stamp duty (if purchasing over $600k), which is a tax that the government charges.
• Land transfer fees, which are the costs of transferring the title into your name.
• Conveyancer fees, which cover the cost of enlisting the help of a lawyer or conveyancer to oversee the paperwork side of things.
• Inspection fees - It is generally recommended that a registered builder or building inspector checks the place over before you commit.

Government assistance

If you need a helping hand to get you to your deposit faster, then there are different government grants available. In some circumstances, there’s also a stamp duty concession, which can mean waiving this fee for all properties if you meet the criteria. Each state and territory has different rules, so it pays to do your research.

  Brain hack: Watch out for ‘optimism bias’

A positive mindset can be a great thing to have, and it can pay to look towards an optimistic future. But let’s be real, stuff happens. It might not be fun to think about, but it’s important to plan for the worst-case scenario. The optimism bias is a way of thinking where we overestimate our chances of experiencing something positive, and underestimate the likelihood of experiencing something negative. So pop on your sensible shoes and know you’re covered if interest rates rise or your circumstances change.

You can use our Home Loan Repayment Calculator to see what you’d be paying in different circumstances.

Step 2: Understand your borrowing power

Knowing how much you can afford at the start of your home-buying journey can influence other decisions you make, like where and what you can buy, so get started by calculating your borrowing power. It will be based on things like how much you’ve saved, other credit or debt you may have, your living expenses, and your regular income.

• Did you know your borrowing power is based on the interest rates at the time you get it calculated? And interest rates can change all the time! So, there’s a solid chance that if interest rates change, your borrowing capacity will change too.

Once you know how much you can spend, the search begins! Jump onto local real estate websites or make use of our free ANZ property profile report.

Next, make open homes your new Saturday ritual. The more you see, the better feel you’ll get for what’s out there for your budget.

  Quick tip:

Contact your local real estate agents to let them know that you’re interested in any off-market opportunities that may come up too.

Step 3: Get a pre-approved loan

The first step to getting a home loan is called pre-approval, and it’s arguably the most important step to getting you into your first home . Your pre-approved loan can influence where and what you buy, and it can give you a confidence boost when searching for your first home because you know how much you can spend.

How does it work? Essentially, the bank will take a detailed look at your financial situation to see if you can make consistent repayments on a loan (here’s a handy checklist to make sure you’re ready to go). It’s called pre-approval because the bank will still need to do a home evaluation of the new property to make sure the amount they’re lending marries up with the value of the property you’re purchasing.

These are the different kinds of home loans on offer:

• Fixed interest loan – The interest rates are set for a certain period and won’t change.
• Variable loan – The interest rate on your loan will change depending on the market.
• Split loan – A combination of fixed and variable rates.

Another thing to consider when choosing a loan is the repayment type. You can choose between:

• Principal and interest – You pay back the amount you borrowed plus the interest your lender charges.
• Interest only – You pay off just the interest your lender charges on the amount you borrowed.

Wondering which options are best for you? Well, the truth is that they all have pros and cons. At the end of the day, it all comes down to your own situation and how you want to handle the loan. You can chat to a home loan expert if you need a hand finding a loan that’s right for you.

  Quick tip:

To save some extra cash, find out if you’re eligible for ANZ’s first home buyer bonus!

Step 4: Go to auction or put in an offer

So, you’ve got your home loan (or at least pre-approval) and you know what you want, it’s time to get your game face on and make an offer they can’t refuse.

When buying a property, you’ve got two buying options at your fingertips:

• Going to auction (you get to wave a paddle, how fun!) – in this case, you’re directly competing with other buyers on the day to secure the purchase.
• Making a private offer – You can offer your ideal amount and go back and forth with the real estate agent until you get to a price everyone’s happy with.