Do you intend to purchase a home? Is there enough money in your savings account ?
Do you know how much money you'll need for a down payment in today's market?
Getting onto the housing market isn't easy, but that does not mean it is impossible. One of the first steps in securing a home loan, whether you're a first-time buyer, upgrading or are an investor, is determining how much of a deposit you'll need. The deposit covers a portion of the price of the property you intend to buy, while the home loan covers the remainder.
So how will you determine if you are financially prepared to approach your bank or lending institution for a home loan?
The first step is to narrow down the price range you're looking in, knowing this will assist you in determining how much of a deposit you can put down. Consider all aspects of your financial situation, as this will have an impact on what you can afford.
While a 20% deposit is normally advised, saving this money can take a long time, especially if you have other bills to pay, and, depending on the market there's a good chance that the cost of housing may rise during this time, making it more difficult for homebuyers to attain the 20% deposit. The good news is that you can still receive a loan with a lesser deposit with the ability to still borrow more than 80% of the property's worth. Some banks may lend up to 95%, with only a 5% deposit. Of course, there may be additional paperwork or terms and conditions and this will be significantly influenced by your financial situation as well as the housing market in which you're looking to buy.
Having a lesser deposit means you'll have to pay Lenders Mortgage Insurance (LMI), which increases your risk. LMI is an insurance that safeguards the lender in the event that the borrower defaults on the loan. LMI is normally waived for borrowers who put down a deposit of at least 20% of the property's purchasing price.
Once you have taken all that into consideration, you also have to be aware of other costs when buying a home like stamp duty, legal costs, home insurance, pest and building inspections, Mortgage registration fee, moving costs, loan-application fee, and council and utility rates among others
Aside from these, there are a few additional factors that could influence the amount of money a lender is prepared to offer you and the interest rate they charge. Your credit record and score assist lenders in determining your ability to repay and handle credit, this may be a factor. Having a savings strategy in place to help you save for a down payment is also an excellent approach to demonstrate that you can keep up with your mortgage payments. Make sure to also pay your credit cards on time and in full, since this will help you improve your credit score If you have a lesser deposit and wish to avoid paying LMI as a first-time homeowner, government incentives such as the First Home Loan Deposit Scheme (FHLDS), the Family Home Guarantee (FHG), and the New Home Guarantee (NHG) can help you. You might wish to check with your Broker and/or your local government to learn more about how government incentives can assist you in finding your dream home. If you need a good reliable broker, let me know. I do have a very good contact.