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FAQ - First Home Buyers

1. How much can I borrow?
2. How long is a home loan pre-approval valid?
3. What documentation will I need to apply for a home loan?
4. How much savings do I need to for my home loan?
5. What is the First Home Owner Grant?
6. Am I eligible for the First Home Owner Grant?
7. What other costs are there to buy a home?
8. How much is stamp duty likely to cost?
9. What is Lender’s Mortgage Insurance?
10. How much do I need for a property deposit?
11. What is a deposit Bond?

How much can I borrow?

The amount you can borrow is often referred to as your borrowing capacity. It will vary depending upon how much you earn, your costs of living and your surplus cash flow. Our free HOME Mortgage calculators will give you an initial idea of how much you can borrow.

For a detailed assessment of your borrowing capacity contact a HOME Mortgage Broker. We will provide a clear indication of how much you should be able to borrow, guide through the choice of different lenders and loan products and arrange a home loan pre-approval.

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How long is a home loan pre-approval valid?

It varies between lenders, from three months all the way through to a year. The important thing to note is that all pre-approval are based on your circumstances remaining the same at the time of purchase. In most cases the bank will request new documentation such as payslips and savings statements to re-verify your position if the pre-approval is much more than a month old when actually purchasing.

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What documentation will I need to apply for a home loan?

In conjunction with submitting your home loan application, you will need supporting documentation to confirm your identity and verify your income. Documents can include:

• Driver's licence
• Birth certificate
• Recent pay slips
• Tax returns
• Bank statements

For more information please view the HOME Mortgage Checklist for Your Loan Application

Your HOME Mortgage Broker will be able to provide an accurate indication of what's required for your individual situation.

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How much savings do I need to for my home loan?

The savings required will depend upon the type of home loan and the lender you select. As a general rule, if you are an owner-occupier you will need savings of 5-10% of the purchase price. This is because most banks currently have maximum loan to value ratios of 90-95%.

Most lenders want to see evidence of 5% genuine savings and in addition they will also let you use First Home Owners Grants entitlements and gifts from parents as additional contributions.

If you are an investor, you will ideally have10% of the purchase price, although it’s possible to purchase with less. HOME Mortgage has a free savings calculator you can use to help you determine the amount you need to save.

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What is the First Home Owner Grant?

An incentive from the Federal Government that provides first home buyers with a one off $7,000 payment. Various other entitlements are available to first home buyers from State Governments around Australia; refer to our First Home Buyer Entitlements page for details.

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Am I eligible for the First Home Owner Grant?

As a basic rule, you are eligible if you are an Australian citizen or permanent resident, buying or building your first home in Australia, with the intention of occupying it as your principle place of residence within 12 months of the settlement. It is important to note that if you are buying the property in conjunction with others, they must also meet the same criteria for the grant to be applicable.

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What other costs are there to buy a home?

As a rule of thumb, it is recommended that you budget 5-7% of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include (but are not limited to):

• Stamp Duty
• Building and/or pest inspections
• Valuation fees
• Lenders mortgage insurance (LMI)
• Solicitor fees
• Insurances
• Connection fees – phone/gas/electricity
• Rates
• Removalist fees

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How much is stamp duty likely to cost?

Stamp duty is a state government tax based on a property’s selling price. Each state or territory has different rules and calculations; some offer discounts to first home buyers. Stamp duty can be a significant additional cost when buying property.

HOME Mortgage has a free Stamp Duty Calculator you can use to help you determine the expected Stamp Duty.

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What is Lender’s Mortgage Insurance?

Lender's Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. It protects the lender from any losses resulting in the sale of a property due to default by the borrower. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80%, of the lender's valuation of the property. Some lenders will allow you to add the LMI premium to your home loan; others require you to pay it up front.

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How much do I need for a property deposit?

Standards do vary from state to state, but in most cases real estate agents will ask for a 10% deposit. However remember that deposits are negotiable and if you don’t have sufficient savings you may be able to arrange a smaller deposit. Alternately you may need to borrow money from a parent or arrange a deposit bond.

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What is a deposit Bond?

A deposit bond can be used as an interim substitute for a cash deposit. They are generally issued by an insurance company or financial institution. If the vendor accepts this bond, the purchaser would be required to pay 100% of the purchase price at settlement.

You can only apply for a deposit bond once you have the formal approval from the lender, which means that you probably won’t be able to provide the deposit bond for at a couple of weeks after signing the contract.

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