Securing finance can be a stumbling block for first home buyers wanting to get a foot on the property ladder. You may not have a large deposit, or you haven’t been in your job long enough to secure a loan, but don’t give up, there are some simple steps you can take to make the great Australian dream your reality.
1. Use a Broker
People who apply for a loan through a broker have a greater chance of being approved than if they went directly to the bank. Brokers are free to use and know the banks well. Not only are you more likely to be approved but you will often get a better deal. Applying directly to a bank will give you a few loan options and a couple of different interest rates but use a broker and you have access to hundreds of providers and thousands of loan types. This is a free service, so take advantage.
Our brokers have a large network of financial service providers and work with first home buyers on a daily basis, with years of experience securing quality loans for young borrowers, their knowledge and experience will help make the process as easy as possible. Remember, brokers take care of all the loan documents and liaise with the banks on your behalf, so you don’t have to worry.
2. Get your paperwork in order
The bank wants to know that you have a genuine savings history and that your deposit wasn’t a gift, so get hold of your bank statements and file them away, ready if you need them. These days, you can access most of your statements online.
3. Cut your Liabilities
If you have multiple credit or store cards, car loans or other debts, this can limit your borrowing capacity. If you have a credit card with a high limit and you don’t need it, reduce it. Regardless of the balance, the financial institutions will take into account the limit when assessing your application. If you need the credit card facilities but don’t want the debt, look into a Visa or Mastercard debit card instead, this allows you the convenience of buying online and paying bills, but you can only spend what you have.
It’s best to pay down your debt if possible, sometimes parents can help, or ask a Sales Rep if there are any other alternatives to help you along. For example, the Australian Government is currently offering $20,000 off some blocks at Whiteman Edge Estate in Brabham for eligible buyers, such as first home buyers. These funds are directly deposited into your account after settlement and have helped our clients pay down some debt and secure a better home loan in advance. Let your broker know if you’re going down this path and they will be able to help you through it.
4. Check your Credit Rating
Don’t wait for your broker or a bank to find your credit file isn’t squeaky clean. If you think the mobile phone company wasn’t happy with your late payments a couple of years ago, it’s best to check your credit file. You can then make contact with any companies that have listed a black mark before applying for a home loan.
5. Parental Help
As house and land prices have increased in the last decade, first homebuyers have turned to their parents for assistance in gaining their first loan. If your parents own a large portion of their home, they may be willing to use some of this equity as security or go guarantor for your home loan.
Once you have paid down a portion of your home loan or your house has increased in value, the loan to value ratio (LVR) will have reduced and you can apply to have your parents removed from the loan documents.
6. Don’t Give Up
If your application isn’t approved the first time, ask your broker what you can do to improve your chances. You may need to increase your income by asking for a pay rise, taking on more hours or looking for a second job. If your small deposit was the main problem, sit down and work out a budget so that you can put aside a set amount every month to achieve your savings goal. Our brokers can help you set up a savings plan to help you reach your goals.
Start Right Homes can assess your borrowing capacity through our online borrowing assessment. Enter a few details and we will get in touch with as estimate of how much you can borrow. If you would like to talk to our in-house broker about how you can maximise your chances of having your loan application approved, call us on 6189 8795.
Owning your own home is a rewarding achievement and definitely worth the effort. Stay focussed and commit to working towards your goal of owning a new home and soon it will be reality!