Choosing a home loan is a decision that will affect you for years. Find our tips and a list of things you should know and ASK before you jump in!
Before jumping in, let’s get a vague idea of what the criteria is for people who are just starting out.
There is a general framework that’s been set by the banks and external lenders. The following things will be considered by your lenders:
- Your age— obviously, you’ve got to be at least 18 years of age in order to be approved for a home loan. However, banks sometimes don’t always consider older people. Fortunately, for those over 55, lenders may be able to offer you a shorter loan term. It just means you have to do more paperwork if you’re older.
- Individual or collective?— Lenders will want to know whether or not you’re borrowing as an “individual” (single person) or as a “collective” (partnership).
- Employment Status— This has been seen to be a big vitiating factor for those, who are affected financially due to Covid. Because your source of income will determine the kind of home loans you are eligible for. If you’re self employed you won’t be doing the same as those who are PAYG employees. Employees only need to present their PAYG payslips to prove their income, whereas self-employed will be asked to present their Business Activity Statements, or tax returns. So, if you are self-employed, you may have to apply for a special type of loan or talk to your accountant to ensure you have the correct paperwork
Other than these, they will look at your financial position so that the lenders know that you have a steady source of income; your credit score and expenses; your assets and liabilities as well as any deposits you might have. You can read more here on how first home buyers are getting into the property market and saving thousands.
So what do you need to know and ask when you finally look into obtaining a home loan? Below are some MUSTS to ensure your dream home journey is a smooth one!
The comparison rate:
A comparison rate includes the interest rate as well as certain fees and charges relating to a loan. The aim of the comparison rate is to help you identify the true cost of a loan and compare loans and services offered by financial institutions and mortgage providers.
Asking for the best rate or any first home buyer discounts
It’s always good to ask. Remember if you don’t ask, The answer is always no. So don’t be afraid to ask. Most home loan providers often offer discounts and special offers to attract first home buyers. For example, a lender may offer you cashback on settlement or waive certain fees on your loan. At Living Home Loans, we ask on your behalf for every loan application we put together to get the best rates.
Knowledge is key. Make sure you understand the different fees such as; Government and statutory fees, lenders mortgage insurance or valuation charges and event based charges such as redraw fees.
Documents needed for application:
Depending on your unique situation you will need to provide a variety of documents. Ensure you know what needs to be provided for a quicker processing time. There are currently quite a few extra requirements as a result of the Covid risks to lenders.
Always check the repayment policy and ensure they match with your earnings. Paying your loan back fortnightly or weekly can get you well ahead and save you years off your mortgage.
Will a default on my credit report affect the loan?
Keep in mind that a default on your credit report – even if paid – will make it harder to get credit. Defaults also last 5 years! Further to consider, your credit cards and other loans get reported if payments are late over the past 2 years so make sure you pay these on time as that will affect your credit score and lending options. Learn more on how unpaid bills can affect your loan application.
Fees or penalties payable on the loan:
Ask your lender for a full list of the fees as you’ll need to make sure you can pay these fees as well as the loan. Your broker will give you these without asking, as a part of your product comparison.
The minimum deposit lenders will generally accept is 5% of the property value, however, we always recommend at least 20%
So, there you go! Now that you’ve reached the end of this article, congratulations on you already one step ahead of where you were. We recommend the next step to be is contacting a professional for some advice, using a property buyer can also help to ensure things run smoothly and answer any questions along the way
If you’re still feeling uncertain on where to go from here, please leave a reply below or contact us here!