Buying your first home: Getting started

Buying your first home is a significant life event. While exciting, it can be daunting if you’re not sure where to start. Here are some things to consider before buying a house and suggestions that may help you navigate some of the potential challenges.

Get your finances in order

Clear debts and loans

If you already have debts such as credit cards or car loans, this may make it more difficult for you to get a home loan or you may not be able to borrow as much as you’d like. Paying off your debts may also help you save more effectively for your house deposit. If you have multiple credit cards, consider whether you need them all. If you have personal loans, credit cards or car loans, for example, you may also want to think about consolidating your debt to help make your debts easier to manage and provide you with a clearer timeline to the day you can pay your debt off. Not all debt is bad but working to pay off higher interest debts and reducing the amount of debt you have may make you more attractive to lenders.

Understand your credit report

Your credit report includes information about your credit history.

When you apply for a home loan, it is the lender’s responsibility to ensure that you can afford to repay the loan. To make that call, your lender will check your finances and credit report. Through your credit report, your lender will be able to see how you’ve handled debt in the past and use that information to assess how you might handle your home loan repayments in the future.

If you’ve had any financial issues in the past, such as unpaid debts or defaults, this will be highlighted on your credit report and could affect whether or not your home loan application is approved.

It’s important to know what’s in your credit report and try to maintain a healthy credit report, to help avoid any surprises when you apply for a home loan.

Start saving for your deposit

Most people usually set a savings target that is 20% of the property price but you might want to think about how much you really need for a house deposit.

A bigger deposit may mean not having to borrow as much money, which may mean paying less interest over the life of your home loan or paying your loan off sooner. Generally, if your deposit is less than 20% of the lender-assessed property value, you might have to pay lender’s mortgage insurance (LMI).

You may want to consider whether paying LMI to get into your own home sooner or waiting until you have saved up a bigger deposit is the right choice for you. Alternatively, you could consider whether it would be appropriate for a family member to be your guarantor.

Use our home deposit calculator to help you work out how much you need for your deposit and other upfront costs.

Find out more about saving for a deposit and get tips on how you can save for your deposit the smart way.

Set a purchase price limit

Setting a maximum purchase price for your first property can help you to avoid overextending yourself. It can also help you set a savings target for your deposit. In setting your purchase price limit, considerations may include how much you can borrow and how much you can afford to repay on an ongoing basis.

Work out your budget

Setting a budget and a goal can help make the whole process of buying your first home less overwhelming. Budgeting may not be as fun as watching home renovation shows for design ideas but can help to focus your search, make it more efficient and hopefully assist you in finding the right home sooner.

Use our home loan calculators and tools to get a rough idea of your borrowing power and repayments to help avoid wasting time looking at properties that don’t fit your budget.

Understand the costs

First home buyers often get caught out by the unexpected costs of buying a house. Stamp duty, building inspection and legal fees, to name a few, can add up and eat into what you’ve saved for your deposit.

Depending on your circumstances, you may be eligible for the First Home Owner Grant and first home buyer stamp duty concession (although availability will vary depending on your state or territory).

You may need to take these costs into consideration when planning your budget. Our home loan deposit calculator can help you estimate how much you may have to pay in upfront fees and other costs. That way you can figure out roughly how much you may have left for your deposit.

Choose a home loan

Get familiar with the different loan types

Lenders offer different types of home loans to suit different needs. Depending on your situation and what you want from your home loan, you might choose the certainty and stability of a fixed rate home loan or the flexibility of a variable rate home loan. There’s also the option to split your loan.

Depending on your loan, you may need to decide if you will make principal and interest repayments or interest only repayments. With principal and interest repayments, when you make a repayment, it pays down some of the amount of money you borrowed (the principal) and the interest accrued. Principal and interest repayments might be higher than payments during the interest only period because you’ll also be paying off the principal, but you’ll likely pay less interest over the life of your loan. With interest only repayments, you only pay interest for a specified period of the loan. This means lower repayments at first and higher repayments when the interest only period ends.

Weighing up the pros and cons of each loan type and deciding what’s best for you can be challenging. Speak to an ANZ Home Loan Specialist or contact an accredited broker to help you understand your options.

Apply for pre-approval

Even if you’re still looking for a home, you can apply for pre-approval. Pre-approval, also known as approval in principle or conditional approval, gives you an idea of how much you could afford to borrow or what your ‘borrowing power’ is.

Since applying for pre-approval is generally free, knowing your borrowing power can help to make your property search more focused and you can be ready to make an offer when you find the perfect property with extra confidence.

It’s important to understand that pre-approval gives you an indication of how much you may be able to borrow but is not a guarantee that you will be approved for a home loan and it is often subject to conditions. When applying for pre-approval, generally lenders will do a credit check and this may affect your credit rating.

Search for the right home

With the added confidence of pre-approval, you can focus on finding the right property that meets your needs and your budget.

Look online and talk to real estate agents to explore what’s available. Looking at a range of different properties that fall within your budget can help to expand your options.

Keep a close eye on the market and the weekly sales results in the areas you’re interested in to help you understand what a property might sell for and what’s good value.

Attend home inspections

When you find a property that ticks all your boxes, make sure you attend the home inspection. A house inspection is the first chance you have as a buyer to view a property in person. It’s a great opportunity to get a feel for the property and keep an eye out for potential issues. If you’re not sure what to look out for, the ANZ House Inspection Checklist (PDF) can help. Remember to bring it with you to your next inspection.

Conduct inspections and checks

If you’re serious about a property, consider arranging building and pest inspections before making an offer on auction day. The reports can help you estimate how much you might need to spend on repairs and that can give you a clearer idea of how much to offer or bid. If the inspections uncover serious problems, you may choose not to buy at all.

If you’re thinking of buying a townhouse or apartment, the strata reports can provide valuable information on whether the property is well-run, well-maintained and adequately financed.

Your guide to buying your first home

There's quite a lot to consider before buying your first home. Our First Home Buyers Handbook (PDF) is helpful to refer to throughout the different stages of buying your first home.