Funding Your First Home

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So you've decided it's time to buy your first home. That's great news but now what? Navigating the home mortgage process can be complex and sometimes confusing but it is well worth it...especially for a first-time homebuyer. Knowing what to expect and what options are available can help pave the way for a much smoother journey.

First Steps to Take

Before applying for a loan it's important to get your financial records in order. Whether you make a paper list or an online spreadsheet, get your information in writing so you can know what you're really working with. It's essential to know how much money you're bringing in each month and how much you're paying out. Track everything from car payments to weekend entertainment costs to savings to get a true picture of your spending and saving habits so you can effectively determine how much you'll comfortably be able to afford for a mortgage payment.

Be sure to consult with multiple lenders to compare rates and products before deciding on a loan. Ask about the benefits of fixed and variable rates, loan terms, points, closing costs and any other fees associated with their products.

Deposit

Nearly all lenders will require you to make a deposit on your new home. While some lenders will accept a deposit of as little as 3%, the traditional home deposit is 20% of the home's purchase price. This might seem like a daunting amount but it's important to keep in mind that the more money you can put down on a home means the less money you'll need to finance. And regardless of your interest rate, the less money you need to pay interest on, the more money you'll save in the long run.

In addition, if your deposit is less than 20% you'll generally need to pay Lender's Mortgage Insurance premiums. This is a safeguard for the lender to protect their investment in the event the homeowner defaults on the loan. Some lenders roll this fee into the mortgage and others require an upfront payment. This is something to consider when choosing a lender.

First Time Home Buyers Grant

The First Time Home Buyers Grant was established in 2000 to help borrowers purchase their first house. The federal government funds the scheme but it is administered through each state or territory individually. The scheme provides a one-time $7,000 payment to assist with the purchase of an existing home or with new home construction.

Borrowers must meet specific criteria to qualify for this program. In general, all borrowers must be purchasing or building their first home in Australia and be citizens of the country. Other criteria, including age requirements, occupancy requirements and property price caps vary by state. Income level and property location (within Australia) have no impact on borrowers' eligibility.

Tomorrow Finance offers home loan comparison software to help people compare hundreds of home loans from Australia's lenders. Find out how much you can save simply by choosing a loan with the best home loan rates.

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