When you’re buying your first home, applying for a home loan may seem like a daunting prospect. But it really doesn’t have to be that way. We show you what you need to know about finding and, most importantly, securing your first home loan so that you can get onto the property ladder as soon as possible.
1. Understand what you can borrow
Before you apply for any loan – and before you even begin your property search – you should always have an understanding of how much you can borrow. The easiest way to do this is to use a mortgage calculator. While a mortgage calculator isn’t exact, it will provide a reasonable estimate of how much a lender will let you borrow and therefore what your budget is when it comes to buying. You should also take time to make sure you know the criteria lenders will take into account when assessing your loan application, such as your credit history and ability to service a loan.
2. Save what you can to reduce your mortgage
Obviously, the more you have saved towards your first home the less money you’ll have to borrow to purchase it. But while that won’t simply mean you’ll have to make fewer repayments, it should make getting a mortgage a lot easier. So if you’re not saving some of your income each month, now’s the time to draw up a budget and stick to it. To make your savings really take off, start a high-interest savings account or take advantage of the government’s first home super saver scheme.
3. Take advantage of first home buyer subsidies and payments
The good news for first home owners around most of Australia is that the government provides incentives towards getting into your first home. These include stamp duty exemptions or concessions and, in many States and Territories, a first home owners grant. These benefits tend to be especially generous if you’re buying a brand new home under a certain value and can make it a lot easier to get into your first home.
4. Consider getting insurance or getting help
Most lenders understand that saving for your first home is not an easy task. That means they won’t always require you to have a 20% deposit before you borrow. Instead, you can often obtain a home loan with as little as 5% of the purchase price, so long as you also take out lenders mortgage insurance (LMI). That said, LMI adds to the cost of your monthly repayments and may affect how much you can borrow. So, if you have a family member willing to help out, another alternative may be to use a guarantor on your loan. Many lenders now have a partial guarantee, where a family member can provide equity to cover your loan only up to the amount where you no longer need to take out mortgage insurance. This can make getting a home loan both easier and cheaper for first homeowners.
5. Think about using a mortgage broker
When you’re applying for a loan, it may be tempting just to speak to the financial institution you already bank with. But it usually pays to look around. The mortgage market is competitive and you may be able to get a much better rate by going elsewhere. Better still, consider using the services of a mortgage broker. A good mortgage broker has access to a large number of lenders and knows their lending application processes. This should save you time and money and give you the best chance of getting your mortgage when you need it. They also should be able to advise you on which home loan is right for you given your own personal circumstances.
6. Get pre-approved
Once you’ve worked out what you want to buy and have an idea of how much to borrow, it’s time to get conditional approval. This isn’t a firm offer of finance but a statement that you should be able to borrow up to a certain amount, so long as you can supply information to support the figures you’ve based your application on – such as salary, savings, assets and expenses – and the value of the home you’re purchasing is verified by a professional Valuer. Conditional approval usually lasts for 90 days and can give you some certainty in your property search. If you use a mortgage broker they’ll generally apply for conditional approval on your behalf.
Be confident
Finally, a lot of first home buyers put off applying for a home loan and buying their first property because they’re worried about the state of the property market, how much they’ve saved, or whether they can get a mortgage in the first place. Given that the market can move rapidly, it pays to be both decisive and confident. So, if you don’t know about how the loan application process works, read up on it. Find out how to get the ball rolling on your application, or what to ask a mortgage broker if you want someone to smooth the process for you. After all, when it comes to getting into your first home, knowledge really is power. Source: realestate
