5 questions to ask before buying your first home

There may come a time where the desire to become a first home buyer will hit. To ensure you choose the right home for you, consider the following questions.

You might be nearing the end of university and considering your next steps or perhaps you’ve been working full time for a few years and would like to swap the rental market for your own home.

Whatever life stage you’re currently at, before you begin attending open homes and picking out your furniture, consider some of the following questions that will help determine the property that is right for you.

1. How much can I afford to borrow?

When you apply for a home loan, the lender will look at your current income and expenses to work out what your borrowing power is. A good place to start is to use an online borrowing power calculator. This will give you an estimate of the amount you may be able to borrow and what your monthly repayments could be.

2. How much will I need to save?

After deciding on an amount you would like to borrow, the next question to ask yourself is how much you need to save. There are several costs that apply when purchasing your own home, which include the upfront deposit, stamp duty (this may be exempt for some first home buyers), conveyancer or solicitor fees and building inspection or a strata inspection report.

3. What is the state of my credit report?

Your credit report shows any lines of credit available to you, such as credit cards or personal loans. It also records every time you apply for credit. It’s important to check what your credit score is and whether you need to focus on paying off any lingering debts before applying for a home loan. You can download a free copy of your credit report once a year, from credit reporting bodies such as Equifax, illion or Experian.

4. Am I eligible for any grants or schemes?

As a first home buyer, if you’re purchasing a new or substantially renovated home you may be eligible for the First Home Owners Grant, which is a one off payment that you can use towards the cost of buying your first home. The amount available to you will depend on the state you live in, which you can check by visiting firsthome.gov.au.

On top of the FHOG, there is also the Federal Government’s First Home Guarantee. This is an entirely different scheme, where the government provides a guarantee to lenders for deposits less than 20%.

5. What kind of home loan do I want?

Lastly ask yourself what kind of home loan is right for you. For instance, should you choose a fixed rate loan, which locks in the rate for an introductory period or a variable rate loan, which means the rate could change with the market?

Also consider the features of the loan, such as whether you would like the ability to make extra repayments and draw on them through a redraw facility. Or alternatively perhaps an offset account is a must on your home loan shopping list. For more information on choosing the right home loan for you, read our in depth guide.