5 steps to preparing to buy your first home

To buy a house you first need to save for a deposit, but there is much more to consider! The first step towards home ownership involves a lot of planning. From saving to researching, this 5 step guide is designed to take you through the steps to reaching one of life's big moments. 

1. Work out your deposit target

The first step towards getting your own home is saving for the deposit. Having a good habit of saving and budgeting is the best way to get going. But it can be hard knowing exactly how big your deposit needs to be.

Take a look at suburbs you hope to buy in, recent sales prices and the average percentage price increase year on year. That will give you a good idea of what you need to aim for. The minimum deposit to take out a home loan is 5% of the total purchase price of the property. This amount will vary depending on how much you’re borrowing and the type of loan you are applying for. 

Have a look at our savings goal calculator to see what you need to save each month over different timeframes to work out how long it will take you to reach your goal.

It is always a good idea to set aside a 20% deposit not only to ensure that you have enough money to cover the additional fees and charges associated with your loan, but also to avoid paying lenders mortgage insurance. You will also need to factor in the associated stamp duty and legal costs, have a look at our stamp duty calculator and property buying cost calculator.

2. Start your budget

If you don’t have a monthly budget already then now’s the time to work out exactly where your money’s been going – and where you want it to go.

Sounds simple but it is the heavy lifter when it comes to saving up for deposits. It’s only when we see how much gets spent on coffees, drinks or takeaways, that many of us realise we can start to keep some money back each month.

Check out our budget planner calculator. What do you think you can save on each week?

3. Think about ways to earn more money

You are never too old to babysit, or take on an extra job doing something like house cleaning or gardening once a week. It will keep you busy when you might otherwise be spending money and it’ll really help that deposit grow faster. If there are two of you saving – like maybe a friend saving for something they want – work out what you can do as a team. It’ll be more fun and you can help motivate each other. 

4. Get ready for the lenders

When looking to buy a home, it’s really important that your credit history is in as good a shape as possible. First, pay off any outstanding debts if you can. Clearing your debts plus a history of regular savings in your bank account, combined with a good record of employment, will really help you secure a home loan in the future. It’ll also stop you paying over big sums in interest; credit card debt eats up money, so clear it.

Second, check your credit rating. Companies that give credit want to know if you have a good financial track record. Credit agencies collect that information to help those companies make decisions about lending to people. They gather information about your credit history and, on the basis of what they find, they give you a credit score – a number between 0 and 1,000. Most credit scores are between 300 and 850. The higher the score, the better your credit rating is.

Have a look at your credit report and make sure everything is accurate. If you see any mistakes, now is the time to correct them. If you’ve never applied for credit, you probably won’t have a credit score but most people have a credit history of some sort.

If your credit history looks good by the time it comes to apply for your home loan, you’ll have a better chance of securing it.

5. Decide if you need expert advice

Expert advice is another potential cost, but there are benefits in getting help. Whether it’s a buyer’s agent, accountant, financial adviser or conveyancer, their knowledge and specialisation could save you money in other areas – not to mention guiding you through some of the more technical aspects of buying a home.

Ready to take the next step? Try our borrowing power calculator to find out how much you could borrow. Alternatively, talk to your trusted Mortgage Broker today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.