First Home Guarantee Scheme 2024 | Buy a home with 5% deposit

Understanding the First Home Guarantee: A Simplified Guide for 2024

The First Home Guarantee is an Australian government scheme designed to help first home buyers enter the property market with as little as a 5% deposit. Avoiding the need to pay LMI, the scheme offers significant savings and quicker access to homeownership. Whether you’re a single or a couple, navigating the process can be easier than you think. This guide covers the key points, application steps, and answers to common questions to help you on your journey to buying your first home.

Overview of the First Home Guarantee

The First Home Guarantee allows first home buyers to purchase a home with a deposit as low as 5%, without needing to pay Lenders Mortgage Insurance (LMI). This government scheme acts as a guarantor, ensuring that first home buyers can secure a home loan without the high upfront costs usually required. With a limited number of spots available each financial year, eligible first home buyers must act quickly to take advantage of this opportunity.

Eligibility Criteria

To be eligible for the First Home Guarantee, your taxable income must be below $125,000 for singles or $200,000 for couples. You must not have owned or had an interest in property in Australia in the past 10 years. The scheme is open to Australian citizens and permanent residents who intend to move into the property within six months. Eligible properties include existing homes, house and land packages, or off-the-plan purchases, all subject to price caps varying by state or territory.

Benefits of the Scheme

The primary benefit of the First Home Guarantee is the ability for first home buyers to enter the market sooner, with lower deposits. Significant savings can be made by avoiding LMI, which typically costs thousands of dollars. Additionally, buyers might access lower interest rates reserved for those with larger deposits, leading to further financial savings over time.

Applying for the First Home Guarantee

To apply for the First Home Guarantee, you can work with a mortgage broker or contact a participating lender. You will need to provide documentation such as your Notice of Assessment and proof of income. With 27 participating lenders, including major banks, you have multiple options to find the right loan agreement. The process involves confirming eligibility, reserving a spot, and finalising paperwork within specified timeframes.

Understanding Property Price Caps

The First Home Guarantee includes property price caps, which vary depending on the location of the property. These caps are implemented to ensure the scheme assists those genuinely in need of entering the property market. For example, the price cap in capital cities like Sydney is higher compared to regional areas. It is important to check the specific price cap for the area where you intend to buy a home.

Step-by-Step Guide to Applying

Confirm Eligibility

Ensure you meet the eligibility criteria regarding income limits, citizenship status, and prior property ownership.

Choose a Property Type

Decide whether you are buying an existing home, a house and land package, or an off-the-plan property. Make sure it fits the criteria of what’s eligible under the scheme.

Collate Documents

Gather necessary documents such as your full name, birth date, Medicare number, Notice of Assessment, and income details.

Find a Participating Lender or Mortgage Broker

Reach out to one of the 27 participating lenders or a mortgage broker to begin the application process.

Apply for the First Home Guarantee

Submit your application with the required documentation and follow the necessary steps as guided by your chosen lender or broker.

Secure the Property

Once pre-approved, you have 90 days to sign a contract of sale and 30 days post-signing to finalise your home loan paperwork.

Common Considerations

When applying for the First Home Guarantee, bear in mind that you’ll need genuine savings for the required deposit, which ranges between 5% and 20% of the property price. Also, be aware that your home loan will still undergo standard assessments, such as credit checks and income verification, similar to any other home loan process.

Conclusion

The First Home Guarantee provides a substantial opportunity for eligible first home buyers in Australia to leap into the property market with reduced financial hurdles and lower deposits. This government scheme has opened doors for many to own a home sooner, saving on costs such as LMI and benefiting from potentially better loan terms. Ensure you meet the eligibility criteria and act promptly to secure a spot.

Frequently Asked Questions

Q: What types of properties are eligible under the First Home Guarantee?

A: Eligible properties include existing houses, townhouses, apartments, house and land packages, off-the-plan apartments, or a contract to build a home.

Q: Can I apply for the scheme if I have a construction loan?

A: Yes, but make sure you are entering an eligible building contract and meet other criteria like starting construction within set timeframes.

Q: What is the role of Housing Australia in this scheme?

A: Housing Australia administers the scheme and oversees the allocation of the limited spots available each financial year, ensuring compliance with the rules.