Buying your first property can be an overwhelming process. First time borrowers often face uncertainty over how to apply for a home loan, how to get approved, the grants they might be eligible for and where they should look to buy. On top of that, the home buying process can be filled with steps you never knew existed and contain jargon you've never heard of before.
Here are a few steps that can help make the process a little less daunting.
Make sure you're actually eligible for a home loan.
Before you dig too deeply into the process, check that you actually qualify for a home loan. Contact your mortgage broker to see if you're in a position to qualify for a loan and if so, get an idea of how much money you can borrow. This will give you a realistic understanding of what you can actually buy.
Research all your home loan options.
The home loan market is complex and competitive and while you'll need to compare the interest rates and products from a range of lenders, you'll first need to know which banks will be prepared to lend to you according to your circumstances. This can be affected by a range of issues like; your deposit size and employment status among other things. Researching these 'policy' matters is best left to a licensed credit advisor like a mortgage broker.
Sort out your debt.
If you're already in debt you might find it harder to get a home loan approved, or you may not be able to borrow quite as much. Focus on paying off any consumer debts you may have before you apply for a home loan. Having some consumer debt may not rule out your ability to borrow but it will affect the loan size you will be eligible for.
Get your deposit together.
While it is possible to take out a loan with a 5 or 10 per cent deposit, the general rule of thumb when buying your home is, the bigger your deposit the easier it is to borrow. Loans where the deposit is less than 20 per cent require the approval of a Mortgage Insurer and this also incurs additional costs in getting the loan - Lender's Mortgage Insurance. It is generally true a larger deposit can also make you eligible for lower interest rates but banks do make cheap rates available for low deposit borrowers. It's important to note that in most cases you'll have to show that your deposit has been saved over time. Banks refer to this as 'genuine savings' and it's necessary to satisfy the mortgage insurer's approval. But don't let this hurdle discourage you if you're keen to be a first home owner. Knowing how hard it can be to save a deposit and pay rent, some banks allow your rental history to be used as genuine savings in certain circumstances.
Crunch all your costs
Repayments are one thing, but home buying incurs a few other expenses. As a first home buyer in Queensland should be exempt from stamp duty up to a certain value but you will pay minor registration costs. Stamp duty exemption will save you thousands. If you're using a low deposit you will incur the cost of mortgage insurance as stated above. If the property is older you should consider a pest or building inspection. You should also see if you're eligible for a first homeowners grant. In Queensland this is up to $20,000 for eligible borrowers.
Position yourself for success.
If you've fallen in love with a particular property, other buyers probably have too. Having all your paperwork and deposit together, plus pre-approval puts you in a much better position to snap up your dream home when you find it.
Get expert help.
There are professionals who can help you with every step of the home buying process. A good real estate agent can help you with the whole buying process, while a mortgage broker can navigate the loan market. Make sure you have a good property lawyer look over your contract thoroughly.
Don't be discouraged by these hoops the bank will make jump through. They're very keen to lend to owner occupied borrowers like you, people who are going to live in the home rather than investors that intend to rent it.
Talk to a licensed credit advisor at EquityLend to get the ball rolling on your new home today.