27 Feb 2020

The process of purchasing your first home is daunting for just about everyone and understanding how it works when you decide to take the plunge can take some time. Here we have compiled a list of the questions everyone either asks or is too afraid to ask but are crucial to have the answer to when the time comes to buy your first home.

How Much Deposit Do I Need?

Ideally 20% of the property value is required if you want to avoid Lender’s Mortgage Insurance (LMI) which is a charge the applicant pays that covers the lender should you default on repayments. Otherwise there are lenders which will accept a 5% deposit or alternatively Keystart, the government backed lender, will accept  a 2% deposit.

Can I Buy a House Without a Deposit?

If you have a family member, namely a parent, who has a property that they are willing to offer as security you may be able to purchase a home without a deposit. Not all lenders have a Family Guarantee policy so you would have to qualify with one of the lenders that do. The other option may be Keystart if you are buying a new property and therefore qualify for the $10,000 grant. Keystart will allow this as your deposit, though it will be dependent on the value of the property being purchased as to if it will be enough.

Do I Qualify for the First Home Buyers’s Grant?

If you have not owned a property for owner occupied purposes then you are most likely able to qualify for the grant, however at present it is only payable in the form of a stamp duty concession for established properties up to $530,000. The $10,000 grant is payable for new properties up to $750,000. Full details may be found at the Office of State Revenue website:

https://www.wa.gov.au/organisation/department-of-finance/fhog

How Do I Apply For The First Home Buyer’s Grant?

When you choose to engage the service of a mortgage broker, the good news is they will complete the application on your behalf, and have it lodged with the lender as part of the application process. You don’t need to do this by yourself.

What Effects How Much I Can Borrow?

Your capacity to borrow is calculated based off your income as against your expenditure. Any personal loans and credit cards will have an implication, with the banks using the limits of facilities and not their balances. Even if you have a credit card that has never been used, its limit will still affect your capacity to borrow. Furthermore, the number of dependents you have along with your living expenses will be scrutinized. Banks will account for all your spending including seamingly innocuous things like gym memberships, streaming subscriptions and dog grooming.

What Happens if My Finance is Declined?

When entering into a contract to purchase a property its important to include a finance clause which acts as protection should you not be able to secure finance. That being said, you also need to demonstrate that you have taken reasonable steps to obtain finance approval if you have to use the finance clause. Its advantageous to therefore get your loan “pre-approved” before making an offer on a property as it gives you the peace of mind that your chances of securing finance will be strong.

Will I Have to Stay with the Same Bank Forever?

You may only qualify with a lender that’s not your first preference but that does not mean you are bound to them for the life of the loan. Once you have demonstrated a solid repayment history and your servicing and property value allows, you may look to refinance your loan should you wish.

How Do I Know What Bank to Choose?

Depending on how strong your position is, you may be limited to only a couple of options due to bank policy but the best way to navigate the lending market is to engage the services of a broker. As an unbiased advocate, a broker will be able to breakdown not only the bank products available but also the process itself.

Here we have only scratched the surface regarding the ins and outs of obtaining finance for your first home. It can be quite an involved process that is best undertaken with appropriate resources at hand to inform and empower the new applicant to make sound financial decisions The good news is we have a suite of informative eBooks that can be downloaded to help both prospective and existing home loan customers. Simply click on the link below to unlock the books available for download.

https://mortgagebroking.blackburne.com.au/e-books/

 

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