Home loans for first home buyers: A beginner’s guide

Step one of buying your first home should be getting an idea of how much the property you want may cost by looking at the sales of comparable properties in the area. To do this: 

1. Search your neighborhood on Homes.co.nz

2. Select Sold in the top left then filter by number of bedrooms, bathrooms and price. 

3. Make sure you only look at homes that have sold in the last few months to get an accurate indication of the price you may need to pay. 

It may also be useful to check Trade Me’s Property News to stay ahead of important developments in the market.

Once you’ve got an idea of how much you may need to spend,it’s time to start thinking about your deposit. Ideally you’ll have 20% of the purchase price ready to go – but you may get away with 10% if you’re buying a new build (or even 5% in some rare cases. More on this later). 

Read more about first home buyer deposits here.

Before you apply for a home loan, it’s a great idea to tidy up your finances:

• Be able to show your genuine savings as much as possible (genuine savings is money you’ve saved up over time as opposed to inherited money or gifts. Lenders like you to have genuine savings because it demonstrates that you can manage money and may be a good borrower). 

• Lock in stable, long term employment. 

• Have a good credit score. 

• Reduce debt, especially high interest stuff. 

• Earn more than you spend.

• Keep good financial habits and avoid defaulting or paying bills late. 

When you eventually apply for a home loan your lender will take a good look at your finances, so if they’re in great shape your first home buyer loan application will stand a better chance.

You’re not in this alone. All first home buyers should get in touch with a lender early in the buying process for help sorting their finances and getting ready to make an application. You’ve got three options:

• Mortgage brokers.

• Banks.

• Non-bank lenders. 

Mortgage brokers act as an intermediary between you and a range of lenders and provide impartial expert advice, usually for free. Most people choose to borrow from a big bank as they may already have term deposits or accounts with them – but keep in mind banks will usually only provide advice relating to their products and services (As opposed to mortgage brokers, who can help you shop around several lenders).  Non bank lenders are an option if banks won’t approve your finance, but generally they charge higher interest rates. 

Read about the difference between using a bank and a mortgage broker.

Buying your first home is hard so take a good look around and get whatever help you can. Unfortunately the first home grant is no longer available but you may be able to withdraw your Kiwisaver, get a low deposit first home loan via Kāinga Ora, or get a little help from family as a guarantor. You should also find a good property lawyer to help with the purchase. 

Read more about how you can get help as a first home buyer. 

Once you’ve spoken to a mortgage broker or lender and got pre-approval sorted, it’s time to start your property hunt. To make it easier make a list of all the features you need in a home and the things you’d like but you’d be willing to compromise on (for example 3+ bedrooms might be essential, but you may be willing to compromise on location). 

When you’re ready, jump on Trade Me Property and get searching!

You’ve found the right property, run it past your lender or mortgage broker and done your due diligence. Now it’s time to make an offer or bid at auction!

Read more about how to buy a house here.