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Buying your home is the most important purchase you will ever make. Whilst it is a very exciting time in your life, it can also be overwhelming, particularly if its your first home.

At Mortgage House we try to make the process as easy as possible so that you feel confident in the choices you have made. We will help you to obtain the necessary knowledge to make the right decisions and show you the most efficient way to buy property.

Our step by step guide will take you through the process and answer a lot of questions you may have when purchasing your first home. The guide has handy calculators to make it easier to create a household budget, calculate how much you can borrow and what your repayments will be, plus much more. You can even get a free pre-approval and print out your certificate in just minutes!

STEP BY STEP GUIDE:

When looking for a home the key steps are:

1. Working out your household budget to identify what money you have available for mortgage repayments.	2. Calculating how much you can borrow?	3. Check eligibility for the First Home Owner's grant or any other government financial assistance
4. Calculate how much deposit you need and how to get that deposit faster	5. Get a Free pre-approval and print out your certificate	6. Find a property
7. Calculate the upfront costs of your purchase	8. Find a home loan that suits your needs	9. Purchase your home and move in

1. How to make a household budget?

By making a household budget, it will be clear to see where your earnings are going and to identify how much money you can afford for mortgage repayments. You may also find areas where you can save money. Take the time to complete this guide with as much information as possible to get an accurate picture of your finances.

Select the frequency of the expenses and earnings, such as weekly, monthly or annually by clicking on the calendar icon on the right of the box.

Once you have completed all the income and expenses fields, it will clearly show you the health of your finances. The figure at the bottom will show you how much money you have available to be put towards mortgage repayments Remember that your current rental expense will be used as part of your mortgage repayment.

TIP: Save or print out these figures as you will need them later on when calculating How Much Can I Borrow.

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2. How Much Can I Borrow?

Click here to see how much you can borrow.

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3. Am I eligible for the First Home Owner Grant or any other Government Financial Assistance?

If you are buying or building your first home, you may be eligible for benefits under the First Home Owner Grant Scheme, First Home Buyers Supplement, Australian Government First Home Owner Boost and the First Home Plus Scheme. The assistance available to you depends on which state or territory you live in.

Broad principles of the grant are:

• Eligible applicants must be a natural person (not a company) who is an Australian citizen or permanent resident buying or building their first home in Australia
• To qualify, neither the applicant nor their spouse (or defacto) can have previously owned a home, either jointly or separately.
• Joint applicants will be restricted to a single application for a single property. Only one payment will be granted.

Please select a state or territory below to find out what government grants are available to you and how to apply for them.

4. How Much Deposit Do I Need and How Can I Get It Faster?

It is best to aim for a minimum of between 5% and 20% deposit for your home. You can save on Mortgage Insurance if you have a 20% deposit.

TIP: the higher the deposit you save the better the rate available to you.

Please read the section on What is The Full Cost of Property Ownership for details on other expenses associated with property purchase such as stamp duty etc.

How Can I Save My Deposit Faster

Establish a realistic savings plan.

Have a thorough look at your current living expenses. Try completing our Budget Planner to see where your earnings are being spent and identify areas where you can save money.

Do you really need everything you buy? Set up a living expenses budget and stick to it. Discipline yourself and buy only what you need.

Setting your goal

Determine how much you need to put aside. Deposit funds on a regular basis to reach your goal and do it!

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5. Get Pre-Approval

Take a few minutes to complete our online Pre-Approval Loan Application and at the end print out your Pre-Approval certificate detailing the amount you are approved for 'in principal'.

This amount is valid for 3 months after which time you will be invited to extend for a further 3 months if required. The pre-approval amount is subject to terms and conditions, click here to read.

Once you are ready to proceed and require a formal loan offer, you will need to complete a full application form which you can do online or have one of our friendly lenders come to you.

TIP: Here is a list of information you should have handy when applying for a Pre-Approval Loan:

• Total Expenses (you can use the figure from Your Budget Planner in Step 1)
• Total Liabilities
• Amount of Deposit Saved
• Cost of Property

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6. Finding a Property

You've qualified for tens of thousands of dollars in incentives from the boosted First Home Owner Grant. Now, the question is: where should you spend it? Kit Kadlec reports

There's a buzz around lately, with many young Australians tempted by the timing of incentives offered to first homebuyers - and especially for new homes.

Real estate agents, builders and brokers alike are seeing a dramatic jump in the number of interested visitors to their offices. These potential buyers are curious, and wondering if the present conditions are ripe for getting into the market. They also realise these incentives are combined with interest rates that were lowered recently, and that housing prices around the country are either flat or depressed.

Wait too long, they surmise, and those incentives may run out - and housing prices might rise again as well.

It's actually not quite so simple, however. The global financial situation is also weighing on many homebuyers' minds, and negative media reports, too, have fed into the fear.

"People are tempering their decision based on what the next 12 months holds for them," says Tony Pizzolato, Australand's general manager for NSW residential.

No time like the present

But apart from any concerns relating to the economy, many property experts say there may not be a better time to buy than the present, particularly with the current incentives and flat prices.

"It's a major factor and I think you'd have to be crazy to ignore it," says Brett Johnson, managing director of Quartile Property Network, of the government incentives offered.

Those buying a home for the first time are eligible for at least $14,000 in government funds - and $7,000 or more than that if the purchase is a new property.

Johnson says that even those residents with little or no savings can jump into the market now, given that they have a good job to secure a loan and are willing to live in an affordable area. These young first homebuyers with low savings might need some help from parents with a deposit before the government pays the grant. But overall, with the grant and boost, savings can approach $30,000-40,000 in some states, in addition to the stamp duty discounts offered.

"You could spend the next five years of your life saving $40,000,"says Johnson. "This is a window of opportunity through which you can jump five years ahead in the housing cycle that previously simply didn't exist."

A word of caution, though, says Johnson, that even with the benefits of the government grant, if you buy the wrong property, it's all washed away.

"If you bought a property and saved $30,000 or $40,000 (from the government grant), but then found a year later it's worth $100,000 less, that's not a good deal," he explains, "so the state of the market is relevant."

Using the grant to invest

There are many variables in the boosted First Home Owner Grant, not the least of which is a larger sum of money for those buying a new home rather than an existing one.

In NSW, for example, the difference is $10,000 ($7,000 in additional federal money plus $3,000 in additional state grant). Not everyone wants the hassles of building a new home, and in many cases it would be a considerable distance from the CBD. Buying a new home off the plan, too, would often mean it's just as far out.

However, even those first homebuyers looking to buy an existing property have little choice in many of the capital cities, where there may be homes for sale, but they are mostly out of their price bracket. In six out of eight capital cities, median house prices are above $440,000, according to Residex, and above $500,000 in two of those.

A government report earlier this year stated the average house price in the capital cities is now equivalent to over seven years of average earnings, up from three in the 1950s to the early 1980s.

For those new to the real estate market, properties are still within an affordable range only in the outer suburbs.

Johnson is very much an advocate of first homebuyers getting the most out of the grant - which means buying a new home and getting the additional $10,000.

"I think the best way to take advantage of it is to say, 'Okay, this is the key - this is what gets me into the market'," he says. "It's the best application of the grant."

Buying new homes

In addition to the extra cash, Johnson says there's plenty of room for growth with the new homes built in some of the mid-to­outer suburbs.

"People are buying property off the plan, which - from a cyclical point of view - makes sense," he adds.

Johnson especially advocates buying in Sydney, where housing prices have been flat for a number of years.

He cites the example of a chef from Surry Hills who recently bought a new house in Penrith, west of Sydney, for $292,000. He had $17,000 in cash, and borrowed the rest. Johnson says this buyer doesn't plan to live in the property permanently - just the time required to qualify.

"In fact, there are good times to buy into a housing market, and also that aren't so good,"

The property would bring in $320 per week in rent and, while that leaves the buyer owing an additional $72 per week in the first year to hold the property, Johnson says the point of such a rental investment is not for immediate gains.

"You are in it for the capital growth," he explains.

Making such a purchase is not very difficult, either. Johnson says all anyone needs is just $26,000 in annual income to secure a loan of $290,000.

"That's how easy it is - it's extraordinary," he says, adding that Australian banks have plenty of money to lend at the moment, despite a growing negative perception.

"This is a window of opportunity through which you can jump five years ahead in the housing cycle that previously simply didn't exist"

"You are in it for the capital growth," he explains.

"That's how easy it is - it's extraordinary," he says, adding that Australian banks have plenty of money

he says. "But now is a good time in Sydney as prices have remained stagnant for seven years. We're not saying it's going to go through the roof, but over the short to medium term ahead, it should be favourable."

Even when taking the incentives from the grant, these new homebuyers don't need to live in the property themselves for any more than six months, based on national and local requirements. So those who prefer to live in the city can make the purchase in a suburb further out, then go back to renting in town while they reap the capital gains over time.

"You live in it for 26 weeks of the year, then you can move and rent it out," says Johnson. "It then becomes an ongoing rental property."

Rule-breakers don't prosper

Those who go forward with this and use their purchase as an ongoing rental should be aware of the requirement of living in the property. The new owner, if using the government grants for first homebuyers, must live in it for six months within 12 months of the purchase.

Violate that - or any of the other conditions involved - and you risk some heavy fines that could add up to as much as $80,000. In addition to doubling what you were awarded in the grant and boost, you are subject to a flat fee of $11,000.

Johnson says the government has ways of tracking down violators.

"They have field officers who knock on your neighbours' doors," he says. "First Home Owner Grants have been around for [ages]. They've had time to figure out how to catch you."

Penalties also apply for making false or misleading statements.

Buying an existing home

Even with all the incentives, there are many who prefer to stick to buying an existing home as, for them, the worry of buying something before it is built is just too much.

"The walls are up, it's finished - you take it as it is," says Pizzolato. "And you don't have the hassles of getting approvals or working over construction issues with the builder."

After all, you can buy an existing home and still take full advantage of the grant and boost. As long as the property is new

• that is, nobody has lived in it since it was either built or significantly renovated
• the buyer qualifies for the whole grant.

However, for those with a preference for an existing previously occupied home, the decision makes it a bit tougher financially. As stated earlier, choosing new over existing can gain first homebuyers between $7,000 and $10,000 in the government boost, making the option more enticing.

That's simple maths, but the reason one might still prefer an existing, previously occupied home is that the property value might be more favourable in the future. For example, if you buy land and build a house in some distant suburb and the value of the property stays flat - or even drops - over the next few years until you decide to sell, it's possible that the savings made on the grant would be cancelled out compared to an existing home elsewhere.

Still undecided whether to buy a new home over an existing dwelling? Turn to page 38 for an in-depth analysis of the merits and disadvantages of the options.

Buying off the plan

Some of the more affordable options are in suburbs not so well established, and that often means buying either brand-new homes or vacant land to build one on.

Pizzolato says there are certainly reasons for doing either. The government incentives with the grant are pretty much the same, since either option is considered a new home. So it often comes down to personal preference in picking the better option for yourself.

"It's a changing lifestyle in Australia," Pizzolato says. "A lot of people want the finished product without the hassles that come with the builder. On the other hand, some people love it and see building their dream home as a fantastic period in their lives. It's really personal choice - and there are pros and cons to both options."

When building a new home, you can have some - or even total - input on the look of it, including the overall design, paint colours and architectural style. In fact, rooms can be designed specifically to meet your needs.

"A large part of your life might be working from home, so you can custom design a home office - or some other special room," says Pizzolato.

Doing things a little differently like that, however, can throw some variables into the construction process which, in turn, can increase the risk of delays or other problems.

Those buying off a pre-designed house plan forgo that flexibility, often exchanging it for a lower price and fewer hassles throughout the construction.

Whether you buy off the plan or build new, those looking to qualify for the grant and boost must have a sunset date of no later than 31 December 2010. 'Sunset' refers to an agreement with the developer that, if the property is not built by that specific date, the buyer can walk away from the contract.

When buying anything prior to construction, you are unable to inspect the property which is a disadvantage as, instead, you have to rely on an artist's impression of your home. That leap of faith is sometimes challenging, especially for those who are new to the market.

Dos and don'ts when buying off the plan

Owner-occupier

While there can be substantial financial appeal in turning your first homebuyer benefits into a rental property and investment, there are many Australians who would prefer to use it to buy a place they'd like to live in themselves.

This growing demographic has been the biggest source of sales in the early weeks of the first homeowner boost, according to many agents and builders.

"Things were going really slowly for us before the boost was announced - they were barely grinding along," says Terry Sullivan, sales and marketing director for Jandson Homes.

Sullivan recalls having only five sales in one month so, even for a smallish-size builder like Jandson, times were bad.

Then, in a single weekend in November, Sullivan says, he took nine deposits.

"We were really knocked off our feet," he declares.

Despite an intensive advertising campaign in local newspapers, he says, it wasn't until the boost came along that buyers started coming back into the market.

Limited time only

While the boost has an expiry date of 30 June, it is also limited by an amount - $1.5bn. How long that figure is going to last is unclear, as it is highly likely that many people who would want to take advantage of it are still biding their time.

"People seem to have decided to think it over until after Christmas," says Pizzolato. "The market is still very much lacking in confidence - and commitments from people."

Other adjuncts to the grant, such as the additional $3,000 to the boost in NSW, are restricted even more. In that case, the boost is limited to $9m, which equates to 3,000 grants.

"Three thousand grants is pretty much a drop in the bucket," Johnson says. "That won't be around for too long." YM

New residential listings advertised each week

Total residential property listings each week

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7. What Will My Upfront Costs Be?

Use our calculator to work out the costs associated with purchasing your property. Please note the figures provided are indicative only. Below is a list of some charges that may be applicable to you:

Government Charges:

• Stamp duty on purchase
• Stamp duty on loan amount
• Registration of title transfer
• Registration of mortgage

Fees:

• Mortgage insurance
• Loan application fee
• Settlement fee
• Estimated legal costs

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8. Find My Home Loan

How to Apply for a Home Loan.

You have the option of applying online, printing out a form or the convenience of having one of our friendly lenders come out to see you.

Once you have found the loan that suits you, here is a list of information you should have ready to complete the loan application.

• Your gross monthly income
• Details of your assets (eg. savings, motor vehicles, shares and other investments).
• Details of your liabilities (eg. balances owing on existing loans, credit and store cards).
• Drivers licence number.

Estimated value of the property you want to purchase, build or refinance.

Address of any existing property you own and will use as security.

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9. Purchase My Home and Move In

Explanation of the Conveyancing Process

Conveyancing involves the transfer of property ownership from one party to another. It makes sense to employ a solicitor or conveyancer to perform this process as a contract's terms and conditions can at times be overwhelming and confusing.

Your legal advisor is responsible for checking the details of the contract, making sure that there are no restrictions to the purchase or intended use of the property, e.g. zoning and title restrictions.

If buying privately and not through auction, the conveyancing process begins with your solicitor or conveyancer examining the contract for sale prepared by the vendor's representative. This contract should detail the:

• Property address,
• Names of the parties (you and the seller),
• Selling price,
• Terms and conditions,
• Timing of settlement (when you take possession of the house).

Settlement Process

Your conveyancer or solicitor will organise a Transfer of Land document for you to sign. This should be done three weeks before the settlement date. This document will be handed to Mortgage House at settlement. It will then be registered at the State/Territory Titles office on your behalf. Upon registration ownership of the property will be changed over to your name.

Your solicitor/conveyancer will contact Mortgage House, the seller's solicitor/conveyancer, and other interested parties to arrange the date, place and time of settlement.

Your solicitor/conveyancer should advise you one week prior to the settlement, of the exact date, time of settlement and the amount that needs to be paid usually by a bank cheque.

After settlement has taken place, the seller's solicitor will contact the real estate agent that sold you the property and advise them to hand over the keys to the property to you.

Your solicitor will confirm settlement has taken place. They will send you a Statement of Adjustment showing you how the money has been disbursed to all parties involved.