Buying a home and taking out your first mortgage is often the biggest financial decision you'll ever make.
As such, it is no surprise that many first home buyers have concerns about the home buying process.
While some of their worries are valid, others are myths that they have heard from their family or friends.
Regardless of whether you're buying your first home or your tenth investment property, it's important to differentiate property market facts from fiction.
MYTH 1: “I need to pay off all my other expenses before I can apply for a home loan”
While being debt free is always nice, you do not need to be debt free in order to apply for a home loan. So long as you can prove that you are capable of managing all of your debts, your lender will not dismiss your application for finance.
MYTH 2: “If my parents go guarantor on my home loan, they'll be out of pocket”
A lot of first home buyers wrongly believe that their parents will be out of pocket if they go guarantor on their loan. This is simply not the case.
A guarantor is a third party to a home loan. They can help you get a home loan by offering additional security support. Guarantors are generally limited to spouses or immediate family members.
If your parent goes guarantor on your loan, they do not have to pay the bank money - nor do they have to give you money. Instead, they put their property (be it their owner occupied or investment property) up as security for your loan. That said, if you default on your loan, your guarantor is responsible for paying back the debt.
MYTH 3: “I have a bad credit history so I can't get a home loan”
Some buyers believe that a bad credit history will stop them from obtaining finance. They worry that their financial reputation has been irreparably tarnished because they have missed the occasional bill payment. While a bad credit history can make it harder to secure a home loan, it doesn't make the process impossible.