Financial Planning for First Home Buyers: Friendly Comprehensive Guide

Buying your first home is an exciting and significant milestone, but it requires careful financial planning to ensure a smooth and successful process. As a first-time home buyer, it’s critical to grasp the financial sides of homeownership, such as saving for a down payment, budgeting, and navigating the home loan market. In this comprehensive guide, we will explore the key financial planning steps for first home buyers, providing valuable insights and tips to help you achieve your goal of owning a home. Let’s dive in!

Step 1: Assess Your Financial Planning Situation  

Before embarking on your homeownership journey, it’s essential to assess your current financial planning situation. This involves evaluating your income, expenses, and existing debts. Here are some important measures to consider:

1. Make a Budget: Make a detailed budget including your monthly revenue and spending. This will help you understand how much you can afford to save for a deposit and determine a realistic monthly mortgage repayment amount.
2. Evaluate Your Debts: Make a list of your current debts, such as credit card debt, personal loans, or college loans. Consider strategies to pay down these debts and improve your overall financial planning position.
3. Examine Your Credit Score: Request a copy of your credit report and credit score. A good credit score is essential when applying for a home loan, as it demonstrates your creditworthiness to lenders. If you have a low credit score, work on improving it before applying for a loan.

Step 2: Set a Realistic Savings Goal  

Saving for a deposit is one of the most critical aspects of financial planning for first home buyers. Here’s how you can set a realistic savings goal:

1. Determine the Deposit Amount: Research the property market in your desired location and identify the average deposit required. Typically, lenders prefer a 20% deposit to avoid additional costs such as lender’s mortgage insurance (LMI). However, some lenders offer low deposit loan options with deposits as low as 5%.
2. Calculate Your Savings Capacity: Based on your budget and current financial situation, calculate how much you can realistically save each month towards your deposit goal. Consider adjusting your spending habits, reducing unnecessary expenses, and exploring ways to increase your income, such as taking on a part-time job or freelancing.
3. Establish a Separate Savings Account: Open a dedicated savings account specifically for your deposit funds. This will make it easier for you to monitor your development and stop you from using the money for other expenses.
4. Automate Your Savings: Set up automatic transfers from your regular account to your savings account on a regular basis. This guarantees steady savings devoid of the desire to spend the money elsewhere.

Step 3: Explore Government Assistance and Grants  

As a first home buyer, you may be eligible for various government assistance programs and grants. These initiatives can provide valuable financial support and help you achieve your homeownership goals sooner. Here are some options to consider:

1. First Home Owner Grant: Check if you qualify for a First Home Owner Grant (FHOG) provided by the government.The FHOG differs from state to state and territory to territory, so find out the particular requirements and application procedure in your region.
2. Stamp Duty Concessions: Some states offer stamp duty concessions or exemptions for first home buyers. This can drastically lower the up-front expenses related to buying a home. Visit your state government’s website or consult with a real estate professional to understand the available concessions in your area.
3. First Home Super Saver Scheme: The First Home Super Saver Scheme (FHSSS) allows first home buyers to save money for their deposit within their superannuation fund. Contributions made under this scheme have certain tax advantages and can be withdrawn when purchasing your first home.

Step 4: Research Home Loan Options  

Navigating the home loan market can be overwhelming for first home buyers.It’s critical to investigate and evaluate several loan possibilities in order to choose which one best meets your needs. Here are some important things to think about:

1. Interest Rates: Compare interest rates from different lenders to find a competitive rate that fits your budget. Remember that interest rates can vary between fixed-rate and variable-rate loans.
2. Loan Features: Consider loan features such as offset accounts, redraw facilities, and the ability to make extra repayments. These features can provide flexibility and help you save on interest over the life of the loan.
3. Loan Term: Choose a loan term that aligns with your financial goals and repayment capacity. Shorter loan terms usually have higher monthly repayments but can save you thousands of dollars in interest over the long run.
4. Fees and Charges: Be aware of upfront fees, ongoing fees, and other charges associated with the home loan. These can vary between lenders and impact the overall cost of your loan.
5. Pre-Approval: Before beginning your house hunt, think about obtaining pre-approval for a mortgage. This will raise your chances of getting your ideal house and provide you a clear picture of your financing capabilities.

Step 5: Seek Professional Advice  

It may be difficult to navigate the complicated world of financial planning and house purchase, particularly for first-time homebuyers. Seeking professional advice can provide valuable insights and guidance throughout the process. The following experts are some you might want to consult:

1. Mortgage Broker: A mortgage broker can help you navigate the home loan market, compare different loan options, and negotiate with lenders on your behalf. They may offer customised advise depending on your financial circumstances and have access to a large variety of loans.
2. Financial Advisor: A financial advisor can assist with overall financial planning, budgeting, and investment strategies. They can help you optimise your finances and make informed decisions to achieve your long-term financial goals.
3. Real Estate Agent: When searching for your dream home, a reputable real estate agent can provide guidance, market insights, and negotiate the best deal on your behalf. They have in-depth knowledge of the local property market and can help you find properties that align with your budget and preferences.

Ready to Become a Homeowner?

This guide has given you a solid foundation for financing your first home. Don’t go it alone – call our experts at Betterway2build today on 08 6118 6119. One of our advisors will craft a custom financial plan just for you. With their guidance, budgeting, saving and preparing will be easy and fun! Make your homeownership dream a reality. Call now!