Buying a home for the first time is an exciting move in your adult life. With prices of homes decreasing this 2019, this is indeed a good timing for first time home buyers to finally get the dream home that they want.
However, there are still a lot of consideration and factors that you should be aware of before taking out a home loan or purchasing a home outright.
Here are some tips you can follow to be able to ensure that your first time home purchase is indeed a good and budget-wise investment.
Can Your Finances Afford a Home Loan?
Before applying for a mortgage, you might want to understand and see where your finances are. Are you even aware of your credit score, your assets,
You should be realistic with what you can afford and how you can repay a home loan in the event that you get a mortgage approved. A home loan calculator can give you an idea if your current finances can afford paying for a home loan.
Review Your Budget and Eliminate Debt
Your debt-to-income ratio tells about your capacity to repay a loan. If your DTI ratio is above 30, you might want to clear off debts prior to applying for a home loan for better chances of approval and better interest rates on your mortgage.
Eliminating or reducing debt also improves your credit score. Better credit scores will get you better deals on your home loan or any other personal loan you might consider applying for. Better interest rates gives you better savings on your loan repayments.
Less debts and monthly obligations in terms of payments will also make it easier for you to repay your mortgage, without hurting your personal finances during the duration of your loan term.
Getting a Pre-Approval
Being prequalified for a loan gives you a bigger picture on what lies ahead on your actual loan application and loan repayment.
The process is almost synonymous to an actual loan application because lenders will pull out your financial records to do the process. You’ll get a better idea on how much loan you’ll get approved and the repayment scheme you’ll have to commit with to repay your mortgage.
Save Up For Your Down Payment
In Australia, you can apply for a 95% LVR home loan, thus will require 5% of the total value of your real estate property as your deposit. However, a low deposit like this may require you to pay for Loan Mortgage Insurance or LMI. It would be ideal to save up for at least 20% of your property value to avoid paying for such insurance. An 80% LVR mortgage also has higher chances of approval.
Saving up for a higher down payment also allows you to enjoy a lower loan principal amount. The lower your principal amount is, the less interests you’ll have to pay for.
Talk to a Trusted Mortgage Broker
For more detailed explanations on the areas that you do not understand in applying for a home loan, it would be advisable to talk with a mortgage broker. You do not have to worry about paying for a fee. Mortgage brokers are given a commission by the bank or the lender for every successful loan application. This will be shouldered by the lender or the bank, and not by the client.
The expertise and experience of mortgage brokers from Intellichoice Finance can help you secure your first home, through a home loan smoothly and within your financial situation. Call us today and take that first step in successfully securing your first dream home.