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How to buy your first home in 2022

Buying your first home is an exciting step to take, but it’s not easy to know where to start.

In this article we’ll provide some tips and answer common questions about buying a home. With interest rates still low going into 2022, it might be the time to purchase your first home.

1. Get your head around the home buying process

There’s a lot more to buying your first home than just making an offer or bidding at an auction. You need to figure out what you’re looking for in a home and what you can actually afford.

Take the time to research the property market and consider what type of property would suit your lifestyle. Is this a property that you plan to live in for a long time? Or is it just a stop along the way to finding your dream home?

You’ll also want to figure out what you’re looking for in a home loan. Here are some points to consider:

2. How much money should I save before buying my first house?

Buying a home will likely be the single biggest purchase you make in your life – and the deposit and repayments aren’t the end of it!

Take note of all the costs of buying a home:

  • Stamp duty will be the largest upfront cost besides the deposit
  • Conveyancing and legal fees
  • Lenders Mortgage Insurance (LMI)
  • Home loan application and establishment fees
  • Property inspections (building inspection and pest inspection)
  • Moving fees

How much money you should have saved largely depends on the price on the property you intend to purchase. Ideally, you want a deposit of at least 20% to avoid paying LMI.

However, for buyers wanting to get on the property ladder sooner, paying LMI may be worth it. Some lenders will approve home loans for borrowers with deposits as low as 5%.

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Get into a good financial position

Lenders want to see borrowers who can prove that they have good financial habits. So, your credit history will be assessed and they’ll want to see bank statements and payslips that indicate a strong ability to meet repayments.

Consider creating a budget and read up on our savings tips to get yourself in good financial shape before applying for a home loan.

3. Understand your borrowing power

Before you start house hunting, it’s a good idea to know how much a lender will let you borrow. This way you can avoid wasting time looking at properties that you can’t afford.

Your borrowing power refers to the loan amount that a lender will likely approve you for. It’s based on your financial situation, and the higher your borrowing power, the more trust lenders have in you to repay a larger home loan.

Remember that just because a lender is willing to loan you a larger amount of money, you don’t have to take it. If you’re happy with a modestly-priced home, don’t feel tempted to splurge just because you can.

Borrowing power is affected by your:

  • Income
  • Debt
  • Living expenses
  • Credit score
  • Assets

Click here to find out how you can increase your borrowing power.

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4. Research your home loan options

Now that you’ve familiarised yourself with the nature of home loans and property buying, it’s smart to look into specific home loan products.

You can easily compare home loans from over 35 different Australian lenders using Lendi’s platform. We’ll ask you a few easy questions about your financial situation and what you want in a home loan so that we can provide you with a shortlist of home loans (and interest rates) that you are more likely to be suited to.

Our Home Loan Specialists will be on hand to answer your questions and guide you through the online application process, if you find a loan you’d like to apply for.

5. Is paying LMI worth it?

Lenders Mortgage Insurance (LMI) is often charged by lenders when a borrower is wanting to borrow over 80% of the property purchase price. That is, their deposit is less than 20% of the property purchase price.

LMI is meant to protect the lender in the event of a borrower being unable to make repayments.

LMI can be costly, depending on a range of factors including:

  • The lender
  • Loan size
  • Deposit amount
  • Whether the property is an investment or owner-occupied property
  • Employment status and history
  • The insurance provider used by your lender

However, sometimes it can be worthwhile to pay LMI if it means you’ll get on the property ladder faster.

For example, in many parts of Australia, property prices are rising. It is possible that your rate of savings may not be on par with the rate of property value growth. So, you might not be able to keep up if you delay buying and you could end up having to fork out more for your preferred property or settle for something cheaper.

Will you need to pay LMI?

See how much you might need to pay if you're low on a deposit.

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6. Take advantage of government programs to help buyers

Did you know that there are a number of grants and incentives offered by the government available to help support eligible first home buyers?

Most of these schemes are exclusively for first home buyers and include grants like the First Home Owner Grant, schemes to help grow your deposit like the First Home Super Saver Scheme, and stamp duty concessions.

It’s worth checking to see if you’re eligible for any of these schemes because they could save you money and help you become a homeowner sooner.

7. Consider rentvesting if you can’t afford to buy in your preferred location

Buying a home is expensive, especially in some parts of the country. Unfortunately, many prospective homebuyers can’t afford to buy in their ideal location.

If this sounds like you, but you still want to own property, you might like to consider rentvesting. Rentvesting is where you buy an investment rental property in a location that you can afford while continuing to rent in your preferred suburb.

This way you generate rental income and possibly equity, while being able to maintain your existing lifestyle. You can even consider investing in property in another city or state. Property managers can service the rental property while you benefit from afar.

Whether you’re ready to buy your dream home or start rentvesting in 2022, Lendi is here for you. Our Home Loan Specialists can help you explore your mortgage options.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: home loan, new purchase, refinance, fixed rate home loans, fixed-rate mortgage, split loan, fixed interest, interest rate, variable interest

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 35% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors.
*WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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