Getting a home loan to facilitate your dream of becoming a homeowner is an exciting and nerve-racking time in the life of a renter. Securing funding to purchase your first home (or another, for many who are already homeowners and looking to move to a new property) requires a lot of planning and an understanding of the marketplace itself. Lenders want to see a variety of important facets of your financial life and fiscal well-being, but getting to this stage can be a challenge for some. Saving, maintaining responsible debts, and building up your credit score along the way are all important aspects of the home-buying experience.
While the average first-time homebuyer is getting older in Australia, you shouldn’t be discouraged if you are younger than the mean age. Homeowners come from all walks of life and have unique financial and social backgrounds and needs. When you’re ready to purchase a home, you’ll know it, but getting to this stage will take some. With this guide, setting yourself up for success when it comes to approaching lenders for a mortgage loan can be made far easier.
Start saving as early as you can.
Savings is perhaps the most important aspect of the entire equation. Without enough capital for a down payment, you won’t be able to purchase a home, no matter what lenders think of you as a borrower. The best way to ensure that you’re working toward a successful home loan application is to start saving as early in the process as you possibly can. As a reference point, the overall loan to value ratio for all Australian residential properties combined is around 23 percent; this includes properties purchased yesterday as well as those that have been owned for decades and are mortgage-free. Taking this figure into consideration, it’s unlikely that you’ll have to come up with the more traditional figure of 20 percent down, but aiming for it will give you a great start as a new homeowner.
The more months you place between this start date and the eventual home loan, the less you’ll have to contribute to the fund every month. The income you receive from investments, salary, and other sources remains generally finite and static, yet the property market is a vibrant and evolving entity. Setting aside a few hundred dollars a month over the course of five years, for instance, will provide a foundation for success when hunting for that perfect home (more so than the same monthly payment into your savings account for, say, only two years). Lenders want to see routine contributions to your savings, and the longer the duration of this monthly contribution, the better positioned you’ll be when it comes time to finalize the home loan documents and the actual transfer of funds.
Target your credit history for the best loan terms possible.
Credit scoring is the other half of the equation when it comes to transforming yourself from a renter into an owner and home loan borrower. This is important information that lenders rely on to make these decisions about prospective buyers. Your credit score represents an attempt to mark you as a borrower in terms of general reliability. Those with long histories of responsible borrowing will have higher credit scores than those who have defaulted on debts, haven’t borrowed before, and showcase irresponsible borrowing patterns.
Credit scores aren’t perfect, but they offer one of the best looks at a person’s borrowing history that a bank has access to. Utilizing credit cards and other loans to your benefit is a must. Put simply, this means taking out a credit card and using it sparingly while paying off the debt quickly every month.
With these two aspects of personal finance in mind, getting your home loan should be much simpler Learn More