You’ve been renting for years now and it’s finally time to get your own house. While it’s exciting to look for houses to buy, applying for your first home loan can be a daunting task for a first time home buyer.
To ensure that your loan application will go as smoothly as possible, here are some things you should know:
You may be eligible to take out a loan, but you should also determine if you can actually repay your loan without undue sacrifice. You can do this by factoring in your monthly income, your partner’s monthly income, and your other sources of income. Next, you should factor in your monthly expenses like your bills, groceries, allowances and so forth, but exclude your rent. Subtracting your monthly income from your expenses will give you an idea of how much you can afford for your monthly repayments. You should also take note of your current situation like if you’re planning on having a family, and where your career is heading.
Determining your budget is the first step. Now, you need to know your borrowing capacity. You can do this by using our borrowing power calculator to find out how much you can borrow based on your income, expenses, debts, assets, application type, and number of dependants. Knowing this will give you an idea about the price range of houses you can afford.
When you apply for a home loan, your lender will examine your credit score. This contains all of your credit activities so it pays to know your credit score to see if the details are accurate, and to see if your score is high or not. You can order a copy of your credit file through credit bureaus such as Equifax.
Have you worked out how much you can afford to pay? Then you need to save for a deposit. Generally, your lender will require you to put down 20% of the value of the property, but the more you can save, the better. A huge deposit will be beneficial in many ways, it lets you own a huge equity in your house instantly, you pay less in interest, you don’t need to pay for lender’s mortgage insurance, and it shows to the lender that you’re financially disciplined—increasing your possibility of having your loan application approved.
First Home Owner Grant
This is one of the benefits of being a first time home buyer in Australia. A First Home Owner Grant or FHOG is a scheme introduced by the Australian government that assists first time homebuyers financially. The requirements aren’t self-evident and every state and territory has different criteria and grant offers. To get more information about FHOG in your state, you may visit the relevant website:
Home loan types and features
Doing your own research will help you when comparing home loans. Remember, interest rate is not the only thing that affects your loan amount and repayments. There are many things to consider, including the types of loan such as variable rate, fixed rate, or split loan. And the types of features you can attach to your loan such as extra repayments, offset sub-account, and interest-only
You can get your loan pre-approved right now here at loans.com.au. A pre-approval on your loan will give you an idea of how much a lender will lend you. This will increase your confidence in negotiating with vendors and at auctions when it’s time to buy a house.