The six ways young hopeful first home buyers will secure a spot in the new loan scheme from the Budget – and you better act quick

First home buyers could save thousands of dollars under the budget's new loan scheme but there are several ways to ensure a successful application. 

There are just 10,000 spots for first home buyers purchasing new homes on the First Home Loan Deposit Scheme , which is part of the 2020-21 Federal Budget.

Usually first home buyers with less than a 20 per cent deposit need to pay the bank lenders' mortgage insurance, which is often expensive. 

But under the FHLDS, first home buyers only need a 5 per cent deposit and can avoid lenders mortgage insurance because the National Housing Finance and Investment Corporation guarantees up to 15 per cent of the value to the lender. 

Real estate agent Adrianna May at a newly sold property in Cronulla. There are 10,000 places for first home buyers purchasing new homes on the First Home Loan Deposit Scheme , which is part of the 2020-21 Federal Budget

To be eligible, applicants need to be Australian citizens who are over 18, have never owned a property in Australia, have between 5 per cent and 20 per cent of their property deposit saved and be the owner occupiers of their new property. 

Single people need to have a taxable income lower than $125,000 in the previous financial year and couples need a combined taxable income less than $200,000 to be eligible. 

The FHLDS is highly coveted since borrowers do not have to pay for expensive mortgage insurance and only have to save a five per cent deposit.

Since the popular scheme has just 10,000 spots nationally, first home buyers need to apply quickly before all the places fill up.  

The scheme ends on June 30, 2021 but places are expected to fill up before then. 

Plant operator Jamie Stock , 22, saved $40,000 over 12 months to pay for his $505,000 four bedroom newly-built home in Clyde in Melbourne's southeast

Plant operator Jamie Stock, 22, saved $40,000 over 12 months to pay for his $505,000 four bedroom newly-built home in Clyde in Melbourne's southeast. 

Speaking to Daily Mail Australia, Mr Stock said first home buyers should 'set a savings goal and set aside a certain amount of money each week'. 

'I had been saving for a while but I only had a savings goal for the last year. My goal was a 30 per cent deposit and some to fall back and I ended up getting to $40,000,' he said.  

'I didn't have to pay the extra $14,000 for lenders mortgage insurance, which made it a lot cheaper. I also only had to pay 5 per cent for the deposit, not 10 per cent. Plus without the insurance, I had an extra $14,000 to fall back on.' 

Mr Stock saved $40,000 but only needed a $25,000 deposit. The deposit is just 5 per cent of the $505,000 home

Property price caps have increased for the next 10,000 buyers on the FHLDS.

The Sydney price cap is $950,000, the Melbourne cap is $850,000, Brisbane's limit is $650,000, Canberra's is $600,000 and the rest of the capital cities are $550,000.

This means Sydney buyers can now purchase a  $950,000 home with a deposit of only $47,500. 

The increased price caps mean that more people than ever before will be eyeing up the loan scheme, further increasing demand for spots.

Bendigo and Adelaide Bank's executive of consumer banking Richard Fennell said borrowers need to compile all their paperwork before contacting a bank lender. 

This includes pay slips, bank statements and tax returns to support an application.    

'They should have a discussion to find out the process they need to go through to reserve a spot and be ready to go. They don't need to be ready to purchase the property straight away but they do need to get an application in time in case all the places run out within months,' Mr Fennel told The Herald Sun. 

The major participating lenders are Commonwealth Bank and NAB while 25 smaller participating lenders include Bendigo Bank and various mutual banks among others.

A young couple gets handed the keys for their new house (stock image). Since the popular scheme has just 10,000 spots nationally, first home buyers need to apply quickly before all the places fill up

Loan pre-approval provides valuable information to buyers about how much they can borrow with a five per cent deposit. 

The pre-approval process is also lengthy as it usually takes 90 days. 

Buyers who finish their pre approval process earlier will be at a distinct advantage in securing a place on the FHLDS. 

Treasurer Josh Frydenberg with a copy of the 2020-21 Federal Budget