March 16, 2015
Applying for a home loan can be a daunting process for those who are not prepared. Save yourself any worry by thoroughly doing your research and making sure that you are in the best position possible, financially. It is important to understand what lenders will be looking for when deciding to loan you money to purchase your property of choice.
Lenders have differing but standardised methods for determining whether borrowers can take on a loan secured against a property. They are looking for evidence that potential borrowers are good savers and have a healthy credit history, consistent employment and manageable levels of debt.
Following are hints on how you can be in the best position to obtain a home loan, whether it’s your first or fifth.
Tip #1: The deposit
Lenders generally like to see at least five percent of the purchase price saved in a bank account. Contributions to the account must be regular and any large deposits need to have been in the account for approximately three months. If you are paying rent, the savings plus the rent should equal or be more than, the amount of your soon-to-be loan repayments.
Tip #2: Determine how much you can afford to repay
Carefully consider your income and expenses and ensure that you are comfortable with the repayments on your proposed home loan. While it is easy to become swept up in the excitement of a property purchase, ownership is expensive. Keep in mind a home loan stretches over a long period of time and there are many costs that come along with buying and owning property.
Tip #3: You!
The lender will do a check of your credit history (they can see when you have borrowed money in the last five years and if you have defaulted on debt repayments or bills over the past five to seven years). Also, you will need to provide information on where you have lived in the last three years and what jobs you have held. They may also ask for evidence of repayments on any current loans and/or liabilities such as credit cards, store cards, etc.
Tip #4: Rid yourself of debt
Consider ways to manage your finances better using your budget. Ideally, clear your debts before acquiring new ones - a clean slate and a good credit history are a great starting point when you are looking to take out a home loan. A $10,000 credit card debt can lower your borrowing capacity on a home loan by around $40,000.
Tip #5: Shop around
Do not settle for the first loan you see. Compare loans from big, small and lesser known lenders to find a financial solution that is suited your individual needs and circumstances. Did you know that different lenders can offer varied loan amounts to the same borrower? The same goes for interest rate, features, fees, accessibility and approval turnaround times. Be sure to compare your options!
Tip #6: Buy the right property
Not all property types are accepted as security for borrowing with your lender. And not all property attracts the highest level of borrowings. Check with your lender first before you make an offer.
To review your options and determine if you are in a good position to obtain a home loan, talk to Daniel Eigenmann at Mortgage Choice Subiaco on (08) 6355 6834 or visit the website at www.mortgagechoice.com.au/daniel.eigenmann.
If you want to find out if you could benefit from switching home loans (i.e. refinance) - take advantage of our Free 15-minute Home Loan Health Check service...
Mortgage Choice Subiaco, Perth - 2/33 Rokeby Road, Subiaco WA 6008 - Tel: (08) 6355 6834 - Mobile: 0412 022 110 - Email: firstname.lastname@example.org