The Essential Guide for First Time Home Buyer Loans

by Jason on May 6, 2010

Questions for First Time Home Buyers

Don’t put one of the biggest financial decisions of your life at jeopardy by getting the wrong advice when finding a first time home buyer loan.

For many first home buyers, this can waste both time and money as they end up choosing the wrong loan for their hard earned deposit.

This guide will provide valuable information on finding the deposit for your loan and how to choose the best first time home buyer loan available.

How Much of a Deposit Do You Need for Your First Time Home Buyer Loan?

With so many first time home buyer loans available, there are even options for buyers with no deposit!

Despite this, with a bigger deposit you can take advantage of a greater selection of first time home buyer loans and find the most competitive interest rate while reducing the start-up fees.

Put more money down and you can receive lower interest as the provider does not have as much at stake and recognizes you as a low-risk customer.

Working hard to build up a good deposit can also let you avoid Private Mortgage Insurance or PMI.

Many lenders will insist that customers take out mortgage insurance if their deposit is less than 20% of the purchase price.

For first home buyers this can add up quickly, with insurance often costing up to 2% of the loan.

To put this in perspective if you were to take out a loan of $250,000 you could potentially be forced to pay a whopping $5,000!

Many lenders will make an exception for first home buyers as they realize the difficulty of saving for a 20% deposit and will offer first time home buyer loans up to 95% of the property value.

This has resulted in a high number of competitive 95% loans on offer with great features for first home buyers.

By being offered a greater selection of first time home buyer loans and being given the ability to take luxury in more competitive interest rates and features, buyers with a 20% deposit are generally in a better position than those without a deposit to offer.

However, with good first time home buyer loans on offer for those with smaller deposits saved, you can still find a loan with the right features to help you make the transition from renting to buying.

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How Do You Find the Best First Time Home Buyer Loan?

While it may be tempting to base your loan decision on the interest rate alone, it’s vital that you also take into the consideration the different features for each loan based on your unique financial situation and goals.  Also, Composite doors may be enticing in regards to a home ownership decision.

By not taking advantage of the right features, you can easily pay far more than is necessary.  This generally comes down to weighing up the interest rate and the flexibility of the options available.

Every first home buyer should consider these questions when comparing different first time home buyer loan options:

  • What are my first home goals?
  • What are my spending habits?
  • Am I capable of budgeting?
  • Am I eligible for the first home owners grant?
  • How might my stream of income change in years ahead?
  • Will I be able to manage a loan with ongoing fees?
  • What are the exit fees of this loan?
  • Does this loan offer portability?
  • Does the loan offer redraw facility?
  • If ahead in repayments, can I stop making deposits for period of time?
  • Can I see myself moving in the next 5-10 years?

Your answers to these questions can greatly influence the loan you decide to go with.

Your first time home buyer loan should save you both time and money but also offer flexible options to ensure you aren’t struggling to make repayments down the track.

How Do You Choose the Right First Time Home Buyer Loan?

Comparing first time home buyer loans on the market can often seem overwhelming with many buyers unsure as to what loans will let them take advantage of a good interest rate while still giving the right features for their home loan needs.

You can make the process much easier by following these three simple steps:

  1. Decide what your loan should offer based on the questions above.
  2. Find the products on offer from the different providers that meet your criteria and create a shortlist.
  3. Once you have your selection of first time home buyer loans, examine each one closely to make your final decision. Don’t be afraid to do extra research and seek advice. Remember this is one of the most important decisions you will ever make.

By following these three steps you can find the best first time home buyer loan for your specific needs. The loan you decide to go with should help you achieve both your short and long term goals.

With thousands of first time home buyer loans available, the hardest part is sorting through all of the competitive deals to find what is best for you.  If you’re looking for a commercial loan for a church, you can still apply some of these principles.

Reward yourself now and in years ahead by following the necessary steps to get the best first time home buyer loan possible.

This has been a guest post by Fred, who is a personal finance writer. He provides budgeting tips and helps people to choose the best first home buyer home loans online.

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{ 8 comments… read them below or add one }

Miranda May 6, 2010 at 9:09 am

Great, in-depth post! I think understanding your goals is the most important item you put in there. You should know WHY you’re doing it, and what you hope to accomplish. Otherwise, you could end up stuck in a situation that you grow to hate.

daltonsbriefs May 11, 2010 at 11:26 am

I would be glad to discuss with your readers the specifics of qualifying for just such a first time home buyer mortgage. To be blunt, it’s harder now than it used to be to get a loan … and may take some careful planning and more time in advance than just two years ago.

Jason May 11, 2010 at 12:17 pm

Steve, sounds like a guest post waiting to happen. Shoot one over, I’ll be glad to put it up! Here’s the guidelines:

Indoor Fireplaces June 17, 2010 at 10:43 am

Hi. Can you offer me really good ideas as to how a self-employed homeowner-wanna-be can get a loan? I find this post truly helpful, but I am still oblivious of how am I to get a loan if I don’t have any employer to attest my paying-power. Help!

Mike Braian December 28, 2010 at 6:08 am

Hi, great post, This is a phenomenal article that has definitely made me more knowledgeable about the subject matter.Very informative post, thanks for sharing. See you again.If want to know more about Sales of existing homes in the Chicago.just log on

Ditech Home Loans February 2, 2011 at 4:53 pm

These are all excellent tips for first time how owners. The type of loan to select depends on a lot of variables depending on the individual’s lifestyle and financial situation.

First home buyers February 18, 2011 at 4:11 am

Aside from the deposit, do not forget to budget around 5-7% of the property purchase price for additional costs such as valuation fees, building/pest inspection report, lenders’ mortgage insurance, stamp duty and other costs. Under-estimating this is where most first homebuyers tripped up. For details, refer to

Kathy Evans July 4, 2011 at 7:34 pm

I agree with you most of the First Time Home Buyer are having mistake on choosing their loan because of not considering several factors or features of the loan they chose.

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