The uncertainty in interest rates and finance approval prevents many first-home buyers from entering the housing market.
CoreLogic research shows that first-home buyers only make up just over 20% of owner-occupier lending.
However, there are ways to improve your chances of getting a loan.
1. Understand how much deposit you need
Identifying where you would like to live and how much you need to save up is necessary. Whilst most banks will tell home buyers that a 20% deposit is required, many lenders offer Lender’s Mortgage Insurance.
In some instances, only 5% or less genuine saving is needed. This will assist first homeowners in getting into their dream home faster if the borrower can find an eligible guarantor ( i.e. Parents who with equity in their property.)
This will help save tens of thousands of dollars in Lender’s Mortgage Insurance and allow the borrower to pay off their mortgage faster.
Planning to save for buying a property? Use our comprehensive saving calculator to work out how much you need to save each week.
2. Understand how much debt you can take on
Most Australians are on good salaries, especially in today’s tight job market.
The current unemployment rate is less than 3.4%, the lowest In 48 years, however, getting into your first home and mortgage requires budgeting and research.
Financiers will look at your essential and nonessential expenditures and make an assessment based on transactions from your bank account and credit cards.
If you’re serious about getting into your home, it would be wise to talk to a mortgage broker or bank officer to understand how much debt you can afford and what spending behaviours you’d need to change so that you don’t get into hardship when you take a home loan.
3. Not all loans are created equal
By default, most Australians will go to the big 4s to get their first mortgage and take what they say as gospel.
The big four banks offer great products, however, finding the right product for you is essential.
Brokers write over 50% of Australian home loans. This is mainly due to their ability to find loans and products from a wider range of lenders thus increasing your chances of getting a loan which fits your circumstances.
Some lenders might offer more significant discounts to first home buyers, others provide 40-year loan terms rather than 30 years.
Some lenders also allow professionals to borrow up to 90% of the purchase price without lenders’ mortgage insurance.
To sum up
- Understand where you want to live and determine how much you need to put in.
- Don’t forget the First Home Owners’ Grant and stamp duty concession. The use of Lenders Mortgage Insurance or Guarantor will assist you to get a loan.
- Work out your borrowing capacity – understand how lenders calculate your borrowing capacity and start making changes in your spending behaviour if you need to borrow more.
- Choose the right products; don’t take what the major banks tell you for granted. Dive deeper with your local broker and discover a new world of products that might better suit you.