The NEw Home buyer

In order to decide whether to become a new home buyer you need to take a variety of factors into consideration such as the size, style and location of your dream home.  The design process of your new home deserves careful consideration you can choose an established plan, modify an existing plan or design your own custom home.  Understanding how to select the right block of land can save you thousands of dollars in infrastructure and building costs.  You will need to obtain a mortgage and if you are a first home buyer establish whether you are eligible for the Government grant.  In most cases there will be two contracts one for the land and the other for building the home.  It is also most important to protect your investment by having insurance in place at handover.

Buying a home

No matter what age you are you have to live somewhere, you can rent a place or borrow the money and become a new home buyer.

In Australia we have a long history of home ownership. Historically most people pay their mortgage off over a 25 or 30 year period knowing that when they retire they have a place to call home.

However times have changed and it is worth considering the pro’s and con’s of renting verses buying.  Consider whether you will be able to purchase a home that is within your budget and the associated costs of the purchase.

To rent or to buy? 

Pro’s of buying

• Buying a  home gives you a sense of belonging to a place of your own

• You will and not be asked to move by your landlord

• You also can make alterations to your home as you please

• Owning your own home can be one of the best long term investment strategies that you will ever make

• When you buy your own home the repayments pay off some of your principle so that eventually you own the home.

• When your home is paid off you no longer have direct accommodation costs

Con’s

• Renting gives you the flexibility to move around more

• Renting does not require you to tie up all your savings in a home deposit

• If you rent you can use the money that you have saved to travel, buy a car, furniture or invest elsewhere

Whether you decide to rent or to become a new home buyer it is a personal decision but  is easier than you think and you will not need as much deposit as you may been lead to believe. New House Direct can help you every step of the way helping you avoid the pitfalls when getting into your own dream home.

What Location is right for you?

There are a number of factors to consider when deciding on the location of your new home.

• The ease of work travel. Where do you work and how are you going to travel to work?

• Is public transport available and what is the ease of access to that transport?

• How far are schools away from the location you are considering?

• Where are shops and services located?

• Are local medical services close by?

• What is the location of sporting facilities, how far are they?

• What recreational facilities are close by and which ones are important to you? You may wish to consider how far local beaches are and if there are boating facilities close by.

• You will need to consider what your long term strategy is when buying a home.  Are you going to living in the home for a few years and then sell and build a new one or is this your forever home?

In deciding the location of your new home you need to consider what your living experiences are going to be like in that location and the lifestyle experiences that are important to you.

By the Beach

Other things to consider when choosing a location

It is important to consider social and environmental factors when choosing the location of your new home. If you have young children then you may be better off in some the newer suburbs that are attracting young families. If you and your neighbours have children the same age they will most likely be going to the same schools. In this environment you will form friendships that will last a lifetime.

If you are a bit older you may wish to move into an area that has more of an older population, usually the more established suburbs.  You will find that you have more opportunities to engage with people your own age through social networks and activates that you get involved in.

Practicable location choice

If you expect your circumstances to change in the future you may wish to consider where you will be in 5 or 10 years from now and whether you will put up with some short term inconvenience for longer term lifestyle aspirations.  

Alternatively your first choice of location may not be practical as it may be outside of your budget or it may not suite other members of your family. It may be wise to look at various secondary locations to your first option that would suite your lifestyle, budget and circumstances.  Most new home buyers change their place of residence a number of times before they are able to get to their dream location.

Your forever home or a stepping stone

There are two approaches you can take to buying a new home. You may wish to make a capital gain and then sell the home or rent it out at a later stage and then buy your dream home in a few years when your financial circumstances have improved.  Alternatively you may be in a good financial position and to buy your dream home that you will live in forever. 

If you are buying a home that you will move out of in a few years’ time it is important not to over capitalize and take your future selling price into consideration.  However if your new home is going to be your forever home you may wish to customize the floor plan to suite your taste and spend some money on luxury extras. 


Your dream home

Floor plan selection 

New home buyers can find it difficult to look at a black and white floor plan and see what your home is going to look like.  Look at the room’s one at a time and imagine what you would like them to look like. Take notice of the size of the rooms you may need to get a tape measure out and compare the sizes on the plan to the place you are living in or somewhere familiar.  Look at the layout of the rooms, where would you like the master bedroom to be, do you want it to be away from the other bedrooms. Does the home have the number of living areas that you require? Do you need a place for privacy such as a study or second living area that can be closed off? 

Orientation of your new home is very important the living areas should face North and East. The Sun will rise in the East and set in the West moving in an arch to the north in winter time and moving in a straight line overhead in the summer.  In the winter the Northern Sun will shine into the windows heating your home in those cold months. In the summer time the Sun will be straight over head with little direct light coming in through the windows that are facing North.  The rooms that face West will be warm in the afternoon as they will receive the full Western Sun. Bathrooms, the Laundry and the Garage are the best rooms to face the West.

You will need to consider if you are going to buy a larger block of land and have a single storey home or whether you will have a double storey on a smaller block. It is always easier to live in a single storey home as there are no stairs to climb and you do not loose space to accommodate a stairwell.  The reason people build a two storey homes is usually because the land is small or they may have some views that they would like to take advantage of. There is no right or wrong answer here and the best solution depends on the circumstances.

Inside living room facing kitchen

Making the floor plan your own

Do not be afraid to change the floor plan most builders these days will accommodate you to some degree.  When you think of your floor plan you will need to understand that homes design is about making the most out of the available space taking into account traffic areas. Segregation of space is important so that a degree of privacy is maintained while the open plan living aspects of a design allows for the occupants to come together. 

Home design is tricky try not to make the home larger for the sake of it as space also needs to be well designed to be functional. Consider you furniture placement and where the occupants will need to walk to go to other rooms etc.  Remember larger areas need to be useful and functional.  Consider what furniture you are likely to place in the home and what size it needs to be to accommodate this.

Choosing the right look for your home

What look are you going to go for when you pick your colours and inclusions such as tiles and carpet? I always think that the best way to do this is to go with a team.  You may go with a modern contemporary them where you have square lines and light tones. Alternatively you may go with something like a Bali theme where you choose earthy tones and a façade that has some feature stone.   

It is a good idea to spend some time on the overall look of your home. The themes that you can come up with are endless your choices will influence you external and internal colour selections including bathroom and kitchen colour choices.  The more effort that you put into the theme that happier you are likely to be with the final ambiance of your home.

What is the home going to cost

It is important to have everything included in the final price of your home if you do not then it is likely that you will have to pay the extras after the contract has been signed out of your own pocket as the bank will lend you a set amount that is determined by the original contract price.

Some builders make it a habit to charge clients extra for things like footings etc. after the contract has been signed. It is best to make sure that the builder will do the necessary soil test etc. before you go to contract so that you can get a fixed price. You also need to be aware of what selections are included in the contract specifications when you go through the colour selection process after the contract has been signed the builder will normally try sell you upgrades. If the upgrades you select at this stage are not included in the contract price you will most likely have to find the extra money that you will be spending.

It is a huge benefit to find a builder that will give you a fixed price full turnkey contract with everything included and if you do make a change after the contract that it is done cost price to the builder.

Selecting the right land

Your ideal block of land

Land selection for new home buyers is vitally important. Not only does it need to be in an area that you wish to live in it also needs to be easy to build on. In other words that block should be as flat as possible with all service available and ready to be connected.

Things to look out for

Sewer Connection

It is important to establish if the block has the sewer available and weather there is a riser for the plumber to connect to. If there no riser has been installed by the water authority then you will have to pay to have one put in and this can cost about four or five thousand dollars.

You can determine if the sewer connection is available on your block by going to the council website and doing a POD or map search or alternatively you can go to the local water authority and pay a small fee for an As Constructed Plan. 

When you purchase a block in a new estate they will usually have the sewer points installed as part of their permit.  If you purchase an infill block that is in an old area and that is not in a new subdivision you will need to be extra vigilant to make sure the sewer connection is available.

If no sewer is available you may need to consider a septic tank, this is often the case when you build on a larger land holding. The sceptic system will form part of your building contract and will need to be costed into the price of your home.

Water Meter

The first thing a new home buyer will need to establish is whether the water meter is connected and you can easily see this by have a look on the block of land to see if there is a meter. The meter will often be in a small oval plastic container that has a black lid on it marked “Water Meter”. If this is the case then that you need look no further. If you do not have a water meter connected then you will need to establish where the water mains are. It is important to understand that if the water mains are on the other side of the road it will cost you from $11,000 to $16,000 to bring to the block of land. 

In most new estate the water meter or at least the mains connection will be at the block however an infill block in an older suburb this not necessarily the case.  You can check where the water is by doing search on the council web site or by paying a small fee to the water board.

If there is no water available to the site which is often the case on larger blocks of land you will have to make sure that a water tank system is included in the contract and that it is adequate for your needs all year round. 

Electricity OH or Underground

You will need to establish where the electricity is and whether it is under ground or over head cable. If it is underground then there should be small green box at the corner of the block. If the electricity is overhead the builder will charge a bit extra for a temporary power pole during construction. 

If the power needs to be bought to the site and is some distance away then this can be very expensive, you will have to get a quote from the energy supplier to bring the power to the site, this can cost many thousands of dollars.

Phone and internet services

It is usually not much of an issue as you will only have to pay a nominal connection fee to have the phone line connected. If you do not see a supply box on site it is a good idea to check with Telstra to see what the process is to get the phone and internet connected and what the cost will be.

Flatness of the land 

It is always best if your block is flat as a sloping block will attract extra cost in retaining and may affect he overall design of the house.  Sometimes it is hard to avoid a slopping site however keep in mind that if you do buy a sloping site then you will get less home for you dollar as the extra costs of construction will need to be taken into account.

Boundary Survey and soil conditions

The builder will need to be able to establish the boundaries of the land.  If the block is not fenced and there are no survey pegs installed the site will need to be resurveyed.  Boundary pegs are White Square pegs at ground level that mark he corners of a block of land. 

If the boundary is not clearly defined then ask that land owner who is selling the land to do a site survey and have that include in the special conditions of the land sales contract otherwise you will have to pay for it later.

The importance of doing full searches

When a new home buyer purchases a block of land you will need a conveyancer or a solicitor to do the land transfer for you. It is most important here that you pay to have the relevant searches done because in Queensland when you buy property it is buyer beware. New home buyers should remember Any incumbencies or monies owing on the property will be inherited by the purchaser.

How much should a new Home buyer borrow

When applying for a new home buyer mortgage you will need to provide information to the mortgage broker about your personal financial circumstances.  From the information you provide the broker will be able to work out how much you can borrow and what repayments you can afford. If you do not qualify for a mortgage initially don’t despair as the broker can advise you what you must do to qualify in the future. 

How much deposit will I need

Assuming you are eligible for the first home owners grant from the Queensland government you will require less deposit than you think. If you were to borrow $400k then you would only need around a $20,000 deposit.  One of the things that you will need to keep in mind is that the less deposit you have the more that you will need to borrow.  The smaller your deposit is the higher your loan value ratio (LVR) and you may need lenders mortgage insurance the cost of which will need to be taken into account when the lender works out how much you can borrow. Some lenders will also charge you a higher interest rate when you have a high LVR.  An answer may be a family guarantee of your loan which could save you the expense of mortgage insurance.  Our mortgage brokers will still provide first time new home buyer mortgages of 95% LVR to FHB that are eligible for the Queensland First New Home Buyers Grant. However included in your loan is the cost of mortgage insurance.  

Loan Value Ratio

The loan value ratio (LVR) is calculated by dividing the amount of the loan by the purchase price. Most lenders will lend up to an 80% LVR without requiring you to take out mortgage insurance.  For example if you buy a house and land package worth $400,000 and you have a deposit of $80,000 (including First New Home Buyer Grant) you will only borrow $360,000. This has an LVR of 80% and you will not need mortgage insurance. In calculating the amount you can borrow you also have to take into account the cost of stamp duty and legal fees. In Queensland you do not have to pay transfer duty on new homes but you will still have to pay an amount on the land. In Queensland if you have never had interest in land anywhere in the world and the purchase price of the land is less than $250,000 you will not have to pay transfer duty.  It is a sliding scale with concessions cutting out at $400,000.

Qualification Criteria outline

In order to qualify for a first time home buyer mortgage you will need to meet 5 key requirements

1. You must have a clear credit file

2. Good rental history renting (lease in same name as sale contract)

3. First New Home Buyer Eligible for the Queensland Great Start Grant

4. Full time employment 6 months or Casual 12 months

5. Minimal existing debts

6.

To establish you eligibility for finance the mortgage broker will ask for the full names and current addresses of all the applicants to the loan, and also ask you about

    • your marital status, 

    • your previous address

    • your employer details or whether you are self employed

    • Occupation position

    • Date you commenced employment

    • Employers contact details

    • Your salary and income.

    • Questions about your financial assets

    • Questions about your financial liabilities

    • Questions about your living expenses and whether you pay any child maintenance

    • You will also be asked to consent to a credit check

You will need to answer these questions honestly so that if there is a problem the broker can work with you to find a solution


No Deposit First NEW home buyer mortgage

If you have no deposit you could use a Family Guarantee (also call a Security Guarantee). A Family Guarantee is when the borrower’s parents, uncle, siblings or friend provide additional security for the new home buyers loan. This allows the borrower to reduce their LVR and avoid paying mortgage insurance. The guarantee allows the borrower to borrow 100% of the loan amount plus associated costs.

Graphic illustration Family Guarantee

The NEw home buyer process

The contracts

When you purchase a new house and land package you will need to enter into two contracts. The first will be a standard REIQ contract for the purchase of the block of land and the second will be a New Home Buyer Contract. The New Home Buyer Contract will be an industry standard contract and will be either a Master Builders Contract or a Housing Industry Association Contract alternatively it can be a Queensland Building Construction Commission contract. 

You will need to hire either a conveyancer or solicitor to do the relevant paper work and transfer he block of land into your name. The building contract will be a plain English contract which is an industry standard for which you will not need a solicitor. You will need to read the new home buyer contract carefully and make sure that you understand it before you sign it. Pay attention to the Special Conditions section as it is here that any extra conditions above the industry standard are inserted by the builder.

Land Settlement

Once the contracts have been sign you will need to give a copy to your mortgage broker.  The Land Sales contract will have a finance period included usually 14 or 28 days after which the contract will go unconditional. You will need to be vigilant here as if you cannot get finance you will need to notify the vendor in writing that you will not be preceding with the contract within this time frame. If this happens the new home buyer building contract will fall over automatically due to your lack of finance but it is wise to notify the builder also. 

Once you have settled on the land send a copy of the confirmation to the builder as he will need this to apply for the building permit.

Colour Selection Process 

The new home buyer colour selection process usually takes place after the construction drawing has been completed and before the building permit is issued. The selection process is different with every builder and is part of their internal systems and procedures which the builder’s contract administrator will explain to you.

The final hand over process

Before final payment is made the builder will ask you to do a new home buyer pre-handover inspection with them (called PCI). You have a choice here you can meet the builder onsite and go through everything with them highlighting any defects that you think need to be rectified or alternatively you can hire a building consultant to do this for you.  Keep in mind you can only do this once so if you miss something you cannot go back and make a new claim. After this process has been completed the builder will issue you the final invoice.  One you pay this the builder will hand over the keys and you will be able to take possession of your new home.

Back of House with balcony

First new home Buyer Tips

Government Grants

The Queensland Government assists first new home buyers to get into a new home by offering reductions in stamp duty and offering a first new home buyer grant. The Victorian government also gives fist new home buyer grants. The grant is designed to get first home owners into the market sooner.  If you are eligible for the grant then you will only need a small deposit to get into you first home.

To be Eligible

To be eligible for the first new home buyers grant Queensland you must

    • You or your partner must be an Australian Citizen or permanent resident,

    • You must be buying a brand new home or building a new home

    • You or your partner must not have previously owned property in Australia

    • You must be at least 18 years old

    • You must be buying or building a brand new home that is valued under $750,000

    • To qualify for stamp duty exemption the land purchase price must be less than $400,000

    • You must not have received a first home owners grant in the past

    • You can only receive the grant if you are an individual not as a company or trustee

    • You must move into your new home within 1 year of handover of your new home as your principle place of residence.

    • You must remain in the home for a continues period of 6 months

    • If your home is bought from a related party then must be bought at market value.

    • You may not be eligible if you receive financial help to buy your home.

If you buy your home from a related person you will need to provide evidence of the homes market value when applying for the first time new home buyer grant.  If you or your partner receives financial help you must lodge a statutory declaration with your application outlining details of whether the money received is owed by you or has been gifted to you. You must also declare whether the person who gave the financial assistance is related to you and whether they intend living in the home.


How do you apply for the First time home buyer grant

The easiest way to apply for the grant is to do so through the mortgage broker who will arrange your finance.  The broker will incorporate the application for the grant with your other loan application documents.  The grant is normally paid directly to your financial institution you get your loan from. The grant will not be paid until you have paid at least the greater of a 10% deposit or the grant amount, the contract has been operating for at least a year and you have occupied you home as your principle place of residence. You cannot be in default of your building contract when the grant is paid.  Please keep in mind that the information on these pages is general in nature and does not constitute individual financial advice. Governments can change the above criteria at any time. You can get more information about the grant from the Queensland Government website. 

What extra costs can a new home buyer expect

When deciding to buy a new home you need consider the extra costs involved.

Do you have to pay stamp duty when you purchase your new home?

What are the costs of hiring a solicitor?

Will you have to pay for mortgage insurance?

How much will it cost to finance the loan during the construction of your new home?

What is the cost of moving into your new home and is your home full turnkey, does it included things like fencing and landscaping?

It is important when buying a first home that you take all cost factors into account. We at NHD can explain to you how a building contract works and the importance of having a full turnkey fixed price contract.  Please feel free to visit our first time new home buyer mortgage page for more information on mortgage requirement and deposit required.

Selling your home in the future

Depending on your planed time frame for staying in the home one of the first new home buyer tips you may need to consider what it will cost you to sell your new home. You will have to pay an agent commission on the sale of your new home and you will have to pay stamp duty on the purchase of your next home.  

Most people hold a home long enough to pay off some of their mortgage and have had some capital growth.  However selling costs always reduce the equity that you have available and if you sell in the short term the selling costs will reduce your capital investment.

Protecting your investment and income

One of the most important first new home buyer tips is advise you to take out full comprehensive insurance on your new home, if you do not and something happens you may end up owing money to the bank without a home to live in. You can also take out insurance to protect your income or insure your loan repayments.  The old saying applies here “Plan for the worst and Hope for the best” applies here.

Conclusion

At New Houses Direct we can help you get into your new home. We take the uncertainty out becoming a new home buyer by helping you avoid the many pitfalls along the way making your experience a pleasant and rewarding one.

Kitchen with window over bench

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