First-Time Home Buyer
Buying a home for the first time can be daunting, especially when it comes to choosing a home loan. At Absolute Finance Solutions, our mortgage brokers can help you find the right loan while giving you the personalized service you deserve. To help you get started, consider these eight factors when applying for a home loan.
1. How Much Can You Afford to Borrow
The first step is to work out how much you can borrow. Look at your income and all expenses, debts and regular bills to work out how much you can put towards a home loan every month. Most lenders will base the size of your home loan on your capacity to meet the loan repayments. Loan repayment amounts should not exceed 30 per cent of your pretax income.
2. Deposit Amount
For most lenders, a minimum of 5 per cent of the purchase price is required as an initial deposit. However, the more you can save for your deposit, the better off you’ll be. Repayments will be reduced and you’ll save money over the life of your loan. Deposit amounts of 20 per cent of the purchase price will most likely help you avoid the one-off lenders mortgage insurance fee.
3. Savings History
Lenders require proof of savings history in the form of bank statements to show regular deposits. You will need at least six months’ statements, which should add up to at least the minimum 5 per cent deposit.
4. Types of Home Loans
In today’s competitive market, finding the right home loan can be a complicated drawn out process. What may be suitable for one person may be inappropriate for another. To help simplify the process, familiarize with what’s available. Also take into consideration your goals and financial circumstances.
5. First Home Owner’s Grant
If you have never owned a home before, you may be eligible for the Federal Government’s First Home Owners Grant scheme. This one-off tax free payment of $7,000 can be used to help fund your additional expenses or in some cases may be used as your deposit . Various state government scheme may also be available so check with your local State Revenue Office.
6. Stamp Duty
Stamp Duty is a state government tax based on property selling price. First home buyers in some states may be entitled to a reduction in stamp duty costs.
7. Lenders Mortgage Insurance (LMI)
If you borrow more than 80 per cent of the property’s value, you will probably have to pay lender’s mortgage insurance. This insurance protects the lenders should you default on the loan.
8. Additional Costs
Apart from stamp duty and LMI, there are a number of additional expenses you need to take into account when buying a home. Costs include loan application fees, solicitor/conveyancing fees, building/council inspection fees, pest inspection, home and contents insurance, moving expenses and utilities connection.