Lenders have differing but standardised methods for determining whether borrowers can take on a loan secured against a property.
Hint 1 - The deposit. Lenders mostly like to see at least 5 percent of the purchase price saved into a bank account. There needs to be regular additions to the account and usually large deposits should have been in the account for more than three months. If you are paying rent, the savings plus the rent should approximately equal or be more than the amount of your loan repayments.
There are some exceptions to the general 5 percent rule for savings, so call your mortgage broker who can help you fully understand what you need to do. It is important to do this early on.
Hint 2 – Determine how much you can afford to repay. You should carefully consider your average expenses and ensure that you are comfortable with the repayments on your proposed mortgage (loan). Your mortgage broker can help you work out the estimated repayments.
While it is easy to become swept up in the excitement of a property purchase and convince yourself you will be able to survive on the minimum, property ownership is expensive and a mortgage stretches over a long period of time. There are many extra costs that come along with buying and they can pop up at any time, so if you are already living with nothing to spare it can become tough.
Hint 3 – You! The lender is very interested in you and your recent history. They 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 loan repayments on current loans.
Don’t be concerned by anything you may have heard regarding rules about stability and type of employment. There are different rules for each lender, and a broker can help you source a loan that fits your employment history. A general rule would be not to move jobs in the three months previous to applying for a loan.
Hint 4 – The property. This is the lender’s “security” for your home loan. It is important to choose a property that is reasonably maintained – lenders do not really like renovators’ dreams! Check with your Mortgage broker who can help you understand what lenders require and whether there are any restrictions on size and location of the property you are interested in.
For more information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"