Applying for a home loan can be a tricky process when you are doing it for the first time.
From knowing how much you need to save for a deposit, to understanding how a guarantor can assist you, there are many questions that can arise.
In a bid to alleviate some of the confusion surrounding the property purchase process, we decided to answer five of the more commonly asked home loan questions.
How much of a deposit do I need?
Generally speaking, a lender will want you to have a deposit of at least 5 – 10% of the purchase price. That said, the bigger the deposit, the better. The more money you have in savings, the better placed you will be to argue for greater home loan discounts. If your deposit in less than 20%, you may be required to pay Lenders Mortgage Insurance. You can pay the Lenders Mortgage Insurance as one lump sum or capitalise it into your home loan. Your local broker can talk you through exactly how Lenders Mortgage Insurance works and how much you may be required to pay.
Do I need a pre-approval?
Pre-approvals are not mandatory when it comes to buying a property, but there are several benefits to having one. They establish your financial position and let you know how much money you can borrow and what you can afford to buy. A pre-approval also proves to a real estate agent that you are a serious buyer. They are free and are valid for three months.
Can I still apply for a home loan if I'm expecting a child?
If you are expecting a child, you are still eligible to apply for a home loan, but it may affect how much money you will be able to borrow. You will need to complete an income, assets and liability test with a lender to prove you are able to service a loan. Your chosen lender will then assess you on your savings, how much parental leave you intend to take, your financial history, and work arrangements.
How does a guarantor loan work?
A home loan guarantor is good way for you to get into the market if you do not have adequate savings for a deposit. Under this arrangement, a family member, such as a parent, uses their property as security for your mortgage. As a result, you will be able to avoid paying lenders Mortgage Insurance and you won't have to save for as long – helping you to enter the market quicker. A guarantor can choose to limit how much they guarantee, so they are only responsible for a certain amount of the loan. However, it is important to note, if you cannot pay back the loan, your guarantor is liable.
How long does it take for my loan to be approved?
After you lodge your loan application, it can take weeks for it to be formally approved by your chosen lender. The time it takes is influenced by a variety of factors, including the availability of supporting documents, the complexity of the application, the volume of mortgage applications being assessed, and the time of year. Before you apply for a loan, you should always make sure you have all the necessary documentation ready as this will help speed up the process. To find out exactly what documents you will need to apply for a loan, click here. Your mortgage broker can help you lodge a home loan application and ensure your home loan is formally approved before your property's settlement date.
If you would like to know more about the home loan process, make an appointment to speak to your local mortgage broker today. They can take the leg work out of applying for a home loan and make sure you have the best product for your situation.