New Home Loans and First Home Buyers
If you have a lot of Debt this will have to be managed before you can obtain a Home Loan. Generally speaking you will need to be relatively Debt free, have about a 5% deposit and your legal fees as a minimum. There are exceptions if you have family willing to put up security on their property, but let's keep this to you as an individual. There can also be Government grants and discounts for first home buyers.
First thing, you will need to show that you have the capacity to pay your mortgage. You need to realise that buying a home is going to be more expensive than renting in the initial phase. You will have rates, home maintenance and if you are buying a unit, strata fees on top of your mortgage payments. A bank or lender is not going to look favourably on you having significant other debts to pay on top of your mortgage. Much experience has told them this will put you into financial difficulty very quickly. The first few years are the hardest and always costs a little more than you think.
What do lenders look for?
- Do you have enough money to live on and pay any other loans like car loans
- What is the credit limit on your credit card, as if you have used it
- What money is left to pay the mortgage, rates and strata fees
- What surplus amount is available to cover emergencies or interest rate rises
- What does your payment and savings history look like
Savings History Example
They will want to see that you have been saving an amount per week over above your rent, that would at least be the same as the mortgage payment you are applying for.
For example: If you are paying $350 a week rent and you are applying for a mortgage that has payments of $500 per week, a lender will want to see that you have been saving the $150-$200 extra per week.
The Sum of the rent and your savings ($500 - $550) would then be equivalent to what your mortgage rates/strata payment would be. If you can show you have been doing this for 6 months and you have been paying your other bills on time, you will have shown good capacity and character and you can get a good deal on a home loan.
The price you are paying for the property must be the right price so that the Lender is comfortable that if something does go wrong, they can get their money back. Generally the lender will build in a risk fee or Insurance on a low deposit purchase. The safer they are and the lower the loan is as a percentage to the home valuation, the lower this fee gets, until they don't charge a fee at all. You may hear this referred to as the LVR. Every property and circumstance will be a little bit different.
If you are fortunate enough to have family that are in a position to put up equity in their property to help you buy yours, there are some lenders that will take this as the security needed, to help lower the Insurance or risk fee. The banks call this your capital and collateral position. They want to see you have invested time and money into making this work.
The last step lenders will look at is what is happening around you? Are your employment conditions favourable, have you been in a steady job and is the Industry you work in stable? Lender's moods improve if the economy is going well and house prices are rising.
how to get the best rate and deal from a lender
So now let's look back and review what gets you the best Interest Rate and Deal on a Home Loan
- The higher your deposit is, the better
- The more comfortably you can cover the repayments, the better
- A good credit rating is needed
- The property is in a good, reputable location
- The price of what you are paying for the property is good value
- You are in stable employment and healthy economic conditions
Seems like a lot doesn't it! Don't worry Fast Debt Help will help you plan to put yourself in the best position to get a Deal on a home Loan that will suit you. Sometimes you only need to make a small adjustment or we will have a lender prepared to make you an offer because they specialise in your situation.
Many of our clients have come through hard times and have put themselves in a good financial position, through taking the steps they needed to address their Debt situations. They just needed a little Fast Debt Help.