First Time Home Buyers Guide (2023)

Before you go house hunting

Review your financial position

Before you start the search for your first home, you’ll need to sort out your finances. Besides the money you need to fund the transaction, there are additional costs and fees that you should also budget for.

If you’re serious about buying your first home, you’ll have already started saving and have a rough idea of what your budget is and how much you’re hoping to borrow for your home loan. To help you with this step, you can use the following online calculators to help work out the costs for buying a property based on your income.

  • Mortgage calculator
  • Loan repayment calculator

Once you’ve got your savings under control and you’ve spoken to aSt.George Home Loan expert, it’s time to start searching for your new home.

What property suits your needs?

Firstly, you’ll need to think about which type of property will suit your needs. Remember to plan ahead – what suits you now might not work for you in 2, 5 or 10 years’ time. After all, the aim of buying your first home is to find somewhere you want to live in for a while.

If you don’t have kids but want to start a family, buying a one-bedroom apartment might not be the best option. If you already have kids, space is going to be important, especially as your children get older. You might even consider becoming a ‘rentvestor’. Owners may choose to continue living in their rental home while purchasing their first home as an investment. The plan is to move in down the track when your needs change, like when you have kids or when the kids are older.

For first home buyers in many of the capital cities, buying a large house isn’t always an achievable goal, but there are still a range of options. Smaller and more affordable properties such as townhouses and apartments can offer a lot for first home buyers and new families. Once you’ve got a clear picture of what will suit your needs, it’s time to think about location.

Is buying off the plan a good option for first home buyers?

Buying off the plan involves purchasing a property that has yet to be built, based on the strength of plans and projected construction timeframes. Off the plan can sometimes be a good option for first home buyers. There are pros and cons, but ultimately you need to think about whether the property and construction time will meet your needs in the long term. It’s appealing to have a home with new fixtures that no one has lived in before you. Buying off the plan could also give you more time to save up if the building is a few years off completion.

Of course, buying off the plan has risks. You can’t see the finished product when you buy and it might not be what you were expecting once it’s finished. Delays in construction or issues with contractors could cause problems, so it’s important to check any contract thoroughly before you sign it. As a savvy home buyer, do your research first and work with experienced developers who have a proven track record so you can lessen the risk of delays.

How do you choose the right location?

You might have ideas about which area you’d like to buy in, but you need to be willing to compromise if your budget isn’t big enough for your dream location. It’s also important to be realistic about the lifestyle you expect you’ll be living. A beachside property might sound nice, but it can be expensive and sought after, so you might have to settle for a location further inland.

Proximity to essential amenities, such as supermarkets, schools, hospitals, parks and public transport is also important. Check what the local roads are like, the distance to and from work and whether you will mostly drive or catch public transport.

Also look at the local infrastructure and do some research into the area. While there might not be a train line when you purchase, there could be plans to build one in the near future. You should check whether there are big developments in progress or due to start work soon. It might be a quiet area now, but you could find yourself living near a tower of apartments down the track.

For help finding the right suburb and property,get full online Property Reports by St.George.

How do you stick to your buying limit?

It’s easy to let your dreams overshadow reality when buying your first home. Think realistically about a home or location and don’t be too picky. While your dream location might be out of reach, trying one or two suburbs away could mean the difference between sticking to your budget and overspending.

When you inspect a property, you need to think practically. A five-bedroom house might give you enough space to set up a home theatre and gym, but it’s not worth the financial stress if it’s more than you need. Be sensible and don’t fall for a home out of your price range.

Auctions may also spur you to overspend, as it’s easy to get swept up in the competition and excitement. If you’re concerned your emotions are clouding your judgement, call on a friend or family member to help you with the property search and stay your hand if the bidding goes beyond your budget at auction. Otherwise, you could hire a buyer’s agent to help you find a property that sticks to your budget.

You’ll also need extra money for the additional fees and costs, so be strict with your budget. Prepare yourself for the unexpected. Consider emergency renovations or repairs, interest rate rises and changes in financial circumstances, such as parental leave or career changes.

Considerations when house hunting

What should I look out for when inspecting a property?

Once you’ve found a place that meets your requirements and falls within your budget, remember that inspecting a property involves more than imagining where you’ll put your furniture.

This is your opportunity check if there are any problems. When you’re inspecting the property, remember to check:

  • Doors and windows open and close
  • Cupboards and wardrobes are empty and functional
  • Lights and electrics work
  • Taps work and the water pressure is suitable
  • There’s no water damage or mould on walls, floors and ceilings
  • The yard for large trees that could fall
  • Whether yards could be susceptible to flooding or other environmental damage
  • Outside condition of the house and structures such as fences, sheds and garages.

Doing your own check before getting a pre-purchase building inspection will help you determine what you’re getting yourself in for. You should also try to inspect the property at different times of day to see what the light and noise is like. Also keep in mind where the windows are positioned and which way the property is facing. North-facing properties will get natural light all year round, but a south-facing property could be gloomy, especially in winter.

Once you’ve gone through all the basic checks and considerations, it’s time to get help from the experts.

The inspection checklist

When you’re seriously considering purchasing a property, you’ll need to get some inspections done by professionals. It’s standard to get a building and pest inspection, however you might want other specialised inspections. Inspections can add up but they could save you money down the track if things go wrong.

Checking the building

Before you hire a building inspector, get quotes from a couple of different businesses and do your research to make sure they’re qualified and licensed.

Building inspectors will check the building as a whole, both inside and out, from floor to ceiling (including under the house and in the roof space). They should review the general condition of the building structure and its foundations and also check the fittings and fixtures, windows and doors, walls, gutters and drain pipes.

You’ll then receive a building inspection report with details of the areas that were included in the inspection. Any problems found during the inspection could be useful when negotiating the property’s price, especially if you’ll need to pay for the repairs.

Inspecting for pests

A pest inspection is another necessity. A pest inspector will check the whole property, inside and out, for signs of pests, such as termites or wood borers. An inspector will look for evidence of actual living pests as well as signs of nests or property damage. If they find serious problems, the repair work could help you decide whether to buy or help you negotiate if you decide the property is right for you.

Reviewing the plumbing

Plumbing inspections aren’t required before purchasing a home, but there may be plumbing issues that you or the building inspector picked up. This could include issues with the water pressure, hot water tank condition, traces of water damage inside or blocked drains outside. Getting a plumbing inspection can help for peace of mind to potentially avoid any nasty surprises once you move in.

Ensuring electrical safety

As with plumbing inspections, an electrical inspection may help you discover if there are any existing issues with the property’s electrics. If you notice anything unusual about appliances or lights during your first visit, an electrical inspection will help determine if there are actual problems. It’s also worthwhile to get an inspection if the property is old, as this may help you anticipate problems that could eventuate later.

Assessing the pool

If you’re looking at a property with a pool, get a pool inspector in to check the condition of the pool, as well as the gate and fence. There are pool safety regulations throughout Australia, so it’s important to know that everything is up to code.

Booking an arborist report

You might have found the ideal home with big, leafy trees, but these beautiful fixtures could cause headaches once you move in. An arborist could help you determine if the property’s trees are healthy and whether they have the potential to cause problems. While that big tree hanging over the house looks nice, it could be dangerous during a storm or block out natural light at certain times of the day.

Property renovations — creating a dream home or a nightmare?

A property may have plenty of potential, but you need to consider whether the work required to realise that value is worth your while. If you have little-to-no renovation experience, it’s probably better to find a home with little or no need for renovation. If you’re up for the challenge, a home requiring a lot of work can offer some great savings, but be careful what you wish for. Buying a half-renovated home could be a serious nightmare, especially if the renovations haven’t gone through proper approvals. Check the plans and if there have been any applications to the council for renovations and extensions. You need to be realistic when it comes to renovating. If you’re a busy family and work full time, spending your weekends renovating might not be ideal.

Once you’re ready to buy

Whether you’ve found a place you really like or are simply ready to start looking seriously, it’s a good time to book a meeting with one of ourSt.George Home Loan experts. They’ll step you through everything that you need to know, from reviewing your finances to preparing documents for a loan application through to loan settlement.

While the whole experience of finding, inspecting, buying and moving into a new home can be confusing, as long as you’re organised and remain focused on the next few steps, you’ll find the process less painful.


First Time Home Buyers Guide? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.

What is the smartest way to buy your first home? ›

Avoiding Debt as a First-Time Home Buyer
  • Use the 25% rule to see how much house you can afford. Before house hunting, determine how much house you can afford. ...
  • Save a down payment. The best down payment is an all-cash offer. ...
  • Save for closing costs. Closing costs are typically around 2–7% of your home's purchase price.
Feb 2, 2023

What is a good credit score to buy a house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.

What is Biden's $25,000 downpayment toward Equity Act? ›

The Downpayment Toward Equity Act provides eligible first-time home buyers up to $25,000 cash for down payment on a home, closing costs on a mortgage, interest rate reductions via discount points, and other home purchase expenses. As of May 16, 2023, the program requires that home buyers: Be a first-time home buyer.

How old are most first time home buyers? ›

But is there a right age when these factors should be in place? And are these the factors Americans should consider when deciding to become a homeowner for the first time? In 2022, the average age of first-time homebuyers was 36, according to the National Association of Realtors (NAR). This is up from 33 in 2021.

How am I supposed to afford a house? ›

Stick to the 28/36 Rule

No matter how you finance your home purchase, most experts agree that people should not spend more than 28% of their gross income on housing expenses, and no more than 36% on debt. For example, if you earn $5,000 each month, your ideal mortgage payment should be no more than $1,400 per month.

Is it easier to buy a first or second house? ›

Buying a second home isn't easy but it's certainly easier than buying your first home. Not only will you have financial advantages and be in a stronger position to negotiate, but you'll also have all of your past experience to draw on.

What credit score is needed to buy a 300k house? ›

Generally speaking, you'll need a credit score of at least 620 in order to secure a loan to buy a house. That's the minimum credit score requirement most lenders have for a conventional loan. With that said, it's still possible to get a loan with a lower credit score, including a score in the 500s.

What credit score do you need to buy a $250 000 house? ›

While credit score requirements vary based on loan type, mortgage lenders generally require a 620 credit score to buy a house with a conventional mortgage.

How hard is it to get a $30 000 personal loan? ›

You will likely need a credit score of at least 660 for a $30,000 personal loan. Most lenders that offer personal loans of $30,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

Is a 20% down payment always required? ›

You no longer need a 20% down payment to buy a home. It's possible to buy a home through a conventional loan with as little as 3% down, and you may even be able to buy a home with no money down if you qualify for a VA or a USDA loan.

What does 20% downpayment avoid? ›

You can avoid paying PMI buy providing a down payment of more than 20% when you take out a mortgage. Mortgages with down payments of less than 20% will require PMI until you build up a loan-to-value ratio of at least 80%. You can also avoid paying PMI by using two mortgages, or a piggyback second mortgage.

What happens if you put a down payment on a house of less than 20%? ›

If your down payment is less than 20% and you have a conventional loan, your lender will require private mortgage insurance (PMI), which is an added insurance policy that protects the lender if you can't pay your mortgage.

Is buying a house at an early age good? ›

Buying A House Young Protects You From Rent Increases And Inflation. One of the biggest advantages of buying a house young is that you lock in the price of the home and monthly payment, regardless of what happens as time goes on. If you live in an apartment, it is likely that your rent goes up each year.

Is 40 too old to buy a house? ›

Age doesn't matter. Counterintuitive as it may sound, your loan application for a mortgage to be repaid over 30 years looks the same to lenders whether you are 90 years old or 40.

Is it smart to buy a house at 20 years old? ›

Is it smart to buy a house in my 20s? Yes, it is smart to buy a house at any age if you've done your homework. Homeownership can bring both risks and rewards. So before you start house hunting, put yourself in position to succeed: Work on your credit profile and start saving up some money.

How much house can I afford if I make 3000 a month? ›

For example, if you make $3,000 a month ($36,000 a year), you can afford a mortgage with a monthly payment no higher than $1,080 ($3,000 x 0.36). Your total household expense should not exceed $1,290 a month ($3,000 x 0.43). How much house can I afford with an FHA loan?

How much house can I get for $2 000 a month? ›

With $2,000 per month to spend on your mortgage payment, you are likely to qualify for a home with a purchase price between $250,000 to $300,000, said Matt Ward, a real estate agent in Nashville. Ward also points out that other financial factors will impact your home purchase budget.

How much money do you need to make a year to afford a $400000 house? ›

Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000.

How much money should you have before you buy a second home? ›

Second home borrowers can expect to need: At least a 10% down payment (sometimes as much as 25%). A credit score of 620 or higher. A debt-to-income ratio of 43% or less.

Why you should buy a house first? ›

Buying a starter home can give you the chance to save money and build home equity in a property at the same time – something you can't do when you rent.

Is it better to own two properties or one? ›

Owning multiple rental properties can lead to greater potential long-term return on investment (ROI). That's because more rental properties can generate more overall net income and appreciation over time.

Can I afford a 300K house on a 70k salary? ›

On a $70,000 income, you'll likely be able to afford a home that costs $280,000–380,000. The exact amount will depend on how much debt you have and where you live — as well as the type of home loan you get.

Can I buy a 300K house with 60k salary? ›

To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

How much is a downpayment on a 200k house? ›

Conventional mortgages, like the traditional 30-year fixed rate mortgage, usually require at least a 5% down payment. If you're buying a home for $200,000, in this case, you'll need $10,000 to secure a home loan.

What is the average payment on a $250 000 house? ›

Monthly payments for a $250,000 mortgage

On a $250,000 fixed-rate mortgage with an annual percentage rate (APR) of 4%, you'd pay $1,193.54 per month for a 30-year term or $1,849.22 for a 15-year one.

How much income do you need to buy a 300 000 house? ›

How much do I need to make to buy a $300K house? You'll likely need to make about $75,000 a year to buy a $300K house. This is an estimate, but, as a rule of thumb, with a 3 percent down payment on a conventional 30-year mortgage at 5 percent, your monthly mortgage payment will be around $1,900.

How much is a downpayment on a 250000 house? ›

Often, a down payment for a home is expressed as a percentage of the purchase price. As an example, for a $250,000 home, a down payment of 3.5% is $8,750, while 20% is $50,000.

Can I get a 20k loan with a 700 credit score? ›

You will likely need a credit score of 660 or higher for a $20,000 personal loan. Most lenders that offer personal loans of $20,000 or more require fair credit or better for approval, along with enough income to afford the monthly payments.

What is the average monthly payment on a 30000 loan? ›

The monthly payment on a $30,000 loan will vary on your interest rate and repayment terms. For example, if your interest rate is 5% and your repayment terms are 4 years long, then your monthly payment would be approximately $690.

What credit score is needed for a 50K loan? ›

For a loan of 50K, lenders usually want the borrower to have a minimum credit score of 650 but will sometimes consider a credit score of 600 or a bit lower. For a loan of 50K or more, a poor credit score is anything below 600 and you might find it difficult to get an unsecured personal loan.

Is it better to put 20 down or pay PMI? ›

If you can easily afford it, you should probably put 20% down on a house. You'll avoid paying for private mortgage insurance, and you'll have a lower loan amount and smaller monthly payments to worry about. You could save a lot of money in the long run.

Does a higher down payment make your offer stronger on a house? ›

Does a higher down payment make your offer stronger? In short, yes, you can get the attention of the seller with a higher down payment. In a hot market, there are a lot of buyers making offers, and higher offers don't guarantee you'll beat out the competition.

How do I get around paying PMI? ›

One way to avoid paying PMI is to make a down payment that is equal to at least one-fifth of the purchase price of the home; in mortgage-speak, the mortgage's loan-to-value (LTV) ratio is 80%. If your new home costs $180,000, for example, you would need to put down at least $36,000 to avoid paying PMI.

What is the lowest downpayment you can do? ›

You may have heard that a down payment should be 20% of a home's purchase price, and while it does have advantages, it's not necessary. A Federal Housing Administration (FHA) Mortgage has a minimum down payment of only 3.5%. It's available to all qualified buyers, regardless of income level.

How much is PMI on a $300 000 loan? ›

But in general, the cost of private mortgage insurance, or PMI, is about 0.5 to 1.5% of the loan amount per year. This annual premium is broken into monthly installments, which are added to your monthly mortgage payment. So a $300,000 loan would cost around $1,500 to $4,500 annually — or $125 to $375 per month.

How much down payment to avoid PMI? ›

How to avoid paying PMI? To avoid PMI for most loans, you'll need at least 20 percent of the home's purchase price set aside for a down payment. For example, if you're buying a home for $250,000, you need to be able to put down $50,000.

How much is a downpayment on a 500k house? ›

For a $500,000 home, a 20% down payment would be $100,000. At a 5.5% rate, the monthly payment for this would be $2,940 (this includes taxes and insurance - scroll down to see how much local taxes can impact your monthly payment and may alter this number for you).

How many people don't put down 20% for a home? ›

In reality, however, a 20% down isn't a requirement. It's merely a goal, and it's one not all homeowners reach. In fact, 44% of homebuyers put less than 20% down, according to an April 2022 confidence index survey from the National Association of Realtors (NAR).

Does PMI ever go away? ›

Even if you don't ask your servicer to cancel PMI, your servicer still must automatically terminate PMI on the date when your principal balance is scheduled to reach 78 percent of the original value of your home.

What age are most home buyers? ›

In 2022, the average age of first-time homebuyers was 36, according to the National Association of Realtors (NAR). This is up from 33 in 2021. A more notable stat, however, is that only 26% of homebuyers in 2022 were first-time homebuyers — the lowest percentage since the NAR started tracking the metric.

What credit score is good for buying a house? ›

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.

How old is the best time to buy a house? ›

When you're in your middle years or older, chances are you'll have a higher, steadier income and a better idea of where you'd like to settle down than when you were first starting out. You'll also leave yourself time to build excellent credit, which may qualify you for the best available mortgage rates and terms.

Can a 70 year old get a 30-year mortgage? ›

Can a 70-year-old choose between a 15- and a 30-year mortgage? Absolutely. The Equal Credit Opportunity Act's protections extend to your mortgage term. Mortgage lenders can't deny you a specific loan term on the basis of age.

Can you be denied a loan because of age? ›

A lender generally can't deny your loan application or charge you higher interest rates or fees because of your age. This rule applies to various types of lenders when they're deciding whether to give credit, such as an auto loan, credit card, mortgage, student loan, or small business loan.

Is it smart to buy a house in your 40s? ›

When you hit your 40s, you may be on more solid financial footing than you were in your 20s. But that doesn't mean you should buy the priciest home on the block—even if you can afford it. Instead, consider the expenses and financial obligations that will come up through your 40s and into your 50s.

Is owning a house important in life? ›

The Importance of Homeownership

Real estate is considered by many to be a sound investment that offers unique wealth-building opportunities. Buying a home expands options for the future, whether you plan to sell and make a profit or leverage the equity in your home to pay for other major expenses.

How long should you be with someone before buying a house? ›

As LendingHome co-founder and CEO Matt Humphrey puts it, “buying a home is stressful for just about anyone, but even more so for couples and first-time homebuyers.” It seems as though partners who have made it through at least five years together have a more solid foundation on which to build.

Is 700 a good credit score to buy a house? ›

Home loans

A 700 credit score is also good enough to buy a house. You can even find lenders that will consider you for higher-value homes requiring “jumbo” mortgages. Your credit score is one of many factors that determine mortgage interest rates.

Can you buy a house with a 600 credit score? ›

A 600 credit score is high enough to get a home loan. In fact, there are several mortgage programs designed specifically to help people with lower credit scores. However, you'll need to meet other lending requirements too.

Is a 720 credit score good enough to buy a house? ›

Home loans

Assuming you have enough income, a 720 credit score is likely high enough to help you get a government-backed mortgage such as an FHA for VA loan. However, it's probably not high enough to get the lowest interest rates available.

Is 720 a good credit score for a house? ›

A 720 credit score is a good credit score. The good-credit range includes scores of 700 to 749, while an excellent credit score is 750 to 850, and people with scores this high are in a good position to qualify for the best possible mortgages, auto loans and credit cards, among other things.

How much income do you need to qualify for a $300 000 mortgage? ›

To purchase a $300K house, you may need to make between $50,000 and $74,500 a year. This is a rule of thumb, and the specific salary will vary depending on your credit score, debt-to-income ratio, type of home loan, loan term, and mortgage rate.

How much house can I afford on $60 000 a year? ›

How much of a home loan can I get on a $60,000 salary? The general guideline is that a mortgage should be two to 2.5 times your annual salary. A $60,000 salary equates to a mortgage between $120,000 and $150,000.

How much house can I afford on a 45k salary? ›

To determine how much you can afford for your monthly mortgage payment, just multiply your annual salary by 0.28 and divide the total by 12.

How far off is Credit Karma? ›

Well, the credit score and report information on Credit Karma is accurate, as two of the three credit agencies are reporting it. Equifax and TransUnion are the ones giving the reports and scores. Credit Karma also offers VantageScores, but they are separate from the other two credit bureaus.

Is it true that after 7 years your credit is clear? ›

Highlights: Most negative information generally stays on credit reports for 7 years. Bankruptcy stays on your Equifax credit report for 7 to 10 years, depending on the bankruptcy type. Closed accounts paid as agreed stay on your Equifax credit report for up to 10 years.

What credit score is needed to buy a house with no money down? ›

What credit score do I need to buy a house with no money down? No-down-payment lenders usually set 620 as the lowest credit score to buy a house. You can boost your credit score by keeping your revolving charge card balances to a minimum and paying all your bills on time.

How accurate is credit karma? ›

Here's the short answer: The credit scores and reports you see on Credit Karma come directly from TransUnion and Equifax, two of the three major consumer credit bureaus. The credit scores and reports you see on Credit Karma should accurately reflect your credit information as reported by those bureaus.

What is the credit score for FHA loan? ›

An FHA loan requires a minimum 3.5% down payment for credit scores of 580 and higher. If you can make a 10% down payment, your credit score can be in the 500 – 579 range. Rocket Mortgage® requires a minimum credit score of 580 for FHA loans.

What FICO score is used for mortgage? ›

While most lenders use the FICO Score 8, mortgage lenders use the following scores: Experian: FICO Score 2, or Fair Isaac Risk Model v2. Equifax: FICO Score 5, or Equifax Beacon 5. TransUnion: FICO Score 4, or TransUnion FICO Risk Score 04.

How big of a loan can I get with a 720 credit score? ›

You can borrow $50,000 - $100,000+ with a 720 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

What is the average credit score by age? ›

The average FICO Score in the U.S. was 714 in 2022, unchanged from 2021.
Average FICO® Score Nearly Unchanged Among All Generations.
Average FICO® Score by Generation
Baby boomers (58-76)740742
Generation X (42-57)705706
Millennials (26-41)686687
2 more rows
Feb 24, 2023

What is the average US credit score? ›

Credit scores are three-digit numbers that show an important piece of your financial history. Credit scores help lenders decide whether to grant you credit. The average credit score in the United States is 698, based on VantageScore® data from February 2021. It's a myth that you only have one credit score.

Top Articles
Latest Posts
Article information

Author: Edwin Metz

Last Updated: 21/11/2023

Views: 5669

Rating: 4.8 / 5 (78 voted)

Reviews: 93% of readers found this page helpful

Author information

Name: Edwin Metz

Birthday: 1997-04-16

Address: 51593 Leanne Light, Kuphalmouth, DE 50012-5183

Phone: +639107620957

Job: Corporate Banking Technician

Hobby: Reading, scrapbook, role-playing games, Fishing, Fishing, Scuba diving, Beekeeping

Introduction: My name is Edwin Metz, I am a fair, energetic, helpful, brave, outstanding, nice, helpful person who loves writing and wants to share my knowledge and understanding with you.