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FIRST HOME BUYERS SEMINAR

At Iden Money we know that buying or building your first home is a very exciting but sometimes nerve-wracking experience if you are not aware of some of the pitfalls that you may encounter.

To help first home buyers take their first steps into the property market, Iden Money is presenting a free educational seminar. During this session our panel of industry experts will discuss:

Property trends, hot spots and negotiation tactics
What to look out for when inspecting a property
The First Home Owners Grant – what are your entitlements
Finance jargon explained, the finance process, help from your family
The legal process from exchanging contracts through to settlement

The seminar will be held in our Parramatta office on Wednesday evening 20 May 2009, at 6:30pm. The evening will close around 8pm, with a question and answers session that will allow you to address any niggling questions to our panel. Prospective first home buyers are encouraged to bring their family along as they will bring valuable insight from their own buying experiences.

Spaces are limited, so be sure to book your spot for this informative evening by registering your details by using our "Make an Appointment" link. Alternatively, please click here to register.

First Home Buyers

Buying or building your first home can be a daunting experience. To ensure it is a completely satisfying experience, a lot of planning and checking should go into this very important milestone in your life – your first home. To assist you with this major task we have set out below some important points to consider for you to successfully own your own home.

	The Home Buying Process Where Will I Live? Points to consider when looking for your new home include: Where would you like to live? Are the available homes in your preferred area within your price range? Are you looking for a house or a unit? Are you looking for a home for the next few years, or to live in for an extended period? If you have a young family, does the area you have chosen suit the needs of children? Does the area have good access to amenities and to major centres? Does the council have plans for any further developments in the area? What is the capital appreciation history of this location? How Much Money Do I Need? Well it depends on where you want to live and the type of accommodation you are looking for. Most people prefer to save a deposit, which is used as their contribution towards the purchase, and to cover the associated transaction costs. For many First Home Buyers family members often assist by way of a gift to help complete the purchase. Borrowing above 80% of the purchase price will incur additional set up costs, such as Lender’s Mortgage Insurance, and borrowing above 95% will usually increase the interest rate. The more you can save the better. How Much Can I Borrow? The amount that you can borrow is determined by the lender by testing your repayment ability based on your income, other personal financial information such as credit card limits or other loans, and assumed details such as living expenses. Usually, loan terms are for 25 or 30 years - the longer the loan term the smaller the monthly repayment. You can obtain an indication as to how much you can borrow by clicking here. Obtaining Your First Home Loan Before you can apply for your first home loan you need to know exactly how much money you need to borrow (taking into consideration savings and other “concessions” that may be made available to you as a first home buyer), and that you have the ability to borrow and repay that amount. Calculate the cost of purchase and all of the additional costs that may be incurred such as: • Stamp Duty on the purchase contract • Loan set up costs • Lender’s Mortgage Insurance (Usually applicable if you have less than a 20% deposit) • Legal Fees • Other moving and relocation costs Contact Iden Money, who will arrange for a consultant to call on you to complete a loan application for your first home loan. We can give you a conditional loan approval before you commit to purchasing a property and ensure that you understand the conditions that must be met before an unconditional approval for your first home loan will be given. Every first home buyer should know (in writing) exactly how much they have to spend before making any commitments. Selecting Your Home Make sure that the home you have selected has no hidden surprises. Obtain a building report to ensure you are not buying someone else’s problems. Check that the local council has approved all major alterations to the house. Check the area at different times such as weekends and weekdays to confirm it is as you think it is and that there aren’t any noise, traffic and parking issues. Obtain other opinions as to the value of the house. Ensure that the council rates (if a house) or the Body Corporate levies (if a unit) are within your budget. Exchanging Contracts Once you have located the home you wish to buy and made an offer that has been accepted by the vendor, the next step is to exchange contracts. Employ a solicitor to review the contract of sale on your behalf – they will be able to advise if there are any non-standard conditions. Fully understand the “cooling off period” terms and conditions. Be certain that your finance is approved and will cover the amount required to settle, before you execute the contract. When you sign you will be required to hand over a small deposit, usually 0.25% of the purchase price, so on a $400,000 purchase approximately $1,000. A 5 business day ‘cooling off period’ usually follows, which allows you to withdraw from the contract should you discover something unsatisfactory (This benefit is not available at auction). It is during this period that the lender will value the property, pest and building inspections would be completed and you would satisfy any outstanding conditions on the conditional loan approval. The deposit (usually 10% of the purchase price) is paid on expiry of the cooling off period; however it is common for a lesser amount than 10% to be negotiated. Deposit bonds are a quick and easy alternative to a cash deposit that may be used to secure a contract. The subject should however be discussed during the negotiation process to ensure that the vendor will accept the guarantee. Arranging Settlement Once the approval is finalised and the deposit has been paid loan documents will be prepared and forwarded to you for execution. Your solicitor should check these documents and assist you to sign them. You will need to arrange insurance over the new home and provide a copy of the certificate of currency to your solicitor. The lender’s name must be noted on the policy as an interested party. Your solicitor will now make further enquiries into the status of the property to ensure that you receive a full and clean title and that no existing monies owing or charges against the property will remain after settlement. The solicitor will calculate the exact amount of monies to be paid out at settlement, with any additional contributions from you to be given to your solicitor for use at settlement. Settlement will occur on a date to be agreed between the purchaser and vendor, often usually (in NSW) 6 weeks from exchange of contracts. In exchange for full payment to the vendor the property title deed will be handed to your lender. A mortgage will then be registered and the lender will keep the title in safe custody. Post Settlement The property is yours. Congratulations. The agent will provide you with the keys to the property and you may move in. The lender and your solicitor will provide you with a summary of the entire transaction detailing how the funds were disbursed. Good lenders provide details of your loan, dates that payments will be deducted and lots of product and Internet/Telephone Banking details.
	The First Home Owner Grant (FHOG) The Australian Government, under certain terms and conditions, may provide a home grant to the first home buyer to help with the purchase of their first home. Briefly, until 30th June 2009 the First Home Owner Grant (FHOG) of $14,000 is available to people buying their first home. If you buy a new building or buy land and have your home constructed, the home grant is $21,000. The size of the home grant will be reviewed after this date. Usually the grant is administered by the lender as agent for the relevant Office of State Revenue. The grant is then approved prior to and made available at settlement with the loan proceeds. You must meet the following eligibility criteria: 1. Each applicant is a natural person and not a company or trust. 2. At least one applicant is a permanent resident of Australia 3. Each applicant must be at least 18 years of age. 4. All applicants and/or their spouse/de facto have not owned a residential property, jointly, separately or with some other person, in any State or Territory of Australia before July 2000. 5. All applicants/and/or their spouse/de facto have not previously owned a residential property jointly, separately or with some other person in any State or Territory of Australia, and occupied that property for a continuous period of at least six months. 6. Each applicant has entered into a contract for the purchase of a home or signed a contract to build a home on or after 1 July 2000. In the case of an owner-builder, laying of the foundations commenced on of after 1 July 2000. 7. This is the first time an applicant and/or their spouse/de facto will receive a grant under the First Home Owner Grant Act 2000 in any State or Territory (unless subsequently repaid.) 8. At least one applicant will occupy the home as their principal place of residence for a continuous period of six months, commencing within 12 months of settlement or construction of the home. Handy Hints: Supporting documents for the First Home Grant (FHOG) must be “certified” copies. Read this condition carefully so that your grant is not delayed. The FHOG will be reviewed on 1st July 2009 and is likely to be capped to homes of $750,000 and less. You should review the conditions applicable in your state. If you intend to construct your home, check the conditions applying to the date the building contract must be signed by. Also, each state provides other benefits to the first home buyer, ranging from stamp duty concessions to additional cash payments. You can find details about the First Home Grant (FHOG) and other assistance provided by state governments by going to one of these websites: NSW www.osr.nsw.gov.au VIC www.sro.vic.gov.au QLD www.osr.qld.gov.au TAS www.treasury.tas.gov.au SA www.revenuesa.sa.gov.au WA www.osr.wa.gov.au ACT www.revenue.act.gov.au NT www.nt.gov.au
	Genuine Savings 1. What exactly is genuine savings? Genuine savings can broadly be defined as an accumulation of funds over a period of time. This accumulation should be through a series of regular credits rather than by way of a lump sum, with the required time frame ranging from 3 to 6 months in order to demonstrate consistency in deposits. Should a lump sum be deposited it would need to be in the account for over 3 months to be viewed as genuine savings. Genuine savings provides the lender with comfort that the applicant has the ability to set aside an amount that may partly represent the proposed mortgage commitment, as well as the fact that the client has ‘hurt money’ involved. Ideally the lender would like to see that the regular deposit , together with any current rental commitment (that may be replaced), will exceed the required repayment on the mortgage. 2. When is it required? Typically genuine savings are required at higher LVRs, however there is no real hard and fast rule, with each lender having their own view on this matter. For some lenders genuine savings may only be needed at higher LVRs, some may not require it at all, whilst others may require it on all loans. 3. What are Non-Genuine Savings? Non genuine savings are funds that have not been saved over a period of time. Lenders prefer to see a borrower have some of their own money invested in a transaction, this is often referred to as ‘hurt money’. Some examples of non genuine savings include: • A monetary gift • Funds borrowed from another financial institution • First Home Owners Grant (FHOG) • Proceeds from the sale of an asset, such as a motor vehicle 4. How do these definitions impact on different lender and mortgage insurer offerings? Essentially, the reduction of maximum LVRs and stricter enforcement of genuine savings has made it harder for some first home buyers to obtain a loan - the market segment that typically does not have a great deal of equity behind them. The insurers continue to offer solutions for applicants without genuine savings, however they have priced their non genuine savings premiums to allow for additional perceived risk. At the end of the day the lender’s own policies will override those of the insurers, so if the applicant is not able to meet the lender’s genuine savings policy the deal would not be approved. 5. What solutions are available where it cannot be demonstrated? As lender policy takes precedent it comes down to accessing a lender that has taken on these LMI products. Iden Money is utilising the LMI providers’ non genuine savings offerings and therefore continues to offer a non genuine savings solution to our clients not able to meet the genuine savings requirements. Where genuine savings can be demonstrated, the benefit to the client is a lower LMI premium. Summary: Your first home purchase may seem daunting. By understanding and following the above information you will make the process of obtaining the First Home Grant (FHOG) and your first home loan much easier. You can obtain further information by clicking on Want To Buy Your Dream Home. For a full exposure on purchasing your first home all First Home Buyers should request a copy of our free report Unlock Your Dreams. Iden Money is here to help. Just give us a call on 1300 334 336 or submit an enquiry.

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