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Tips for First Home Buyers

Getting into the property market for the first time can be a daunting prospect. Here are some tips to consider, to ensure you will meet the lenders’ criteria.

Savings

Most lenders prefer you to have at least 10% of the purchase price as "genuine savings" - as a general rule of thumb . This may be made up of 5% genuine savings, and other monies according to what each lending institution requires.  In some instances only 3% of genuine savings need be provided and in other instances it may be dependant upon the loan value ratio, no genuine savings required. This is not considered as genuine savings unless it has been held in your own account for at least 3 months. Some lenders are now approving loans with 5% deposit with strict conditions but 10% is a good rule of thumb. It is quite common for first home buyers to have a gift from their parents. It should be noted that the more genuine savings a first home owner has to put towards their home purchase, the better the position they will be in to acheive a loan approval. One thing to consider is that if you have 20% deposit you won't need to pay Mortgage Insurance which will save you thousands of dollars. A larger deposit (genuine savings plus other monies) will assist the purchaser to reduce the liability of having to pay mortgage insurance.

Employment Stability

It is important to show the lender that you have stability in your job. This generally means at least 6 months in a full or part time job or at least two years working in the same industry. If you are self employed you need to be able to provide 2 years tax returns.

Affordability

Lenders have their own calculators to assess whether you can afford the loan you are applying for. They will take into account things like your existing commitments and living expenses to calculate if you have enough left over to meet the mortgage. One way to increase your borrowing capacity is to get rid of any credit cards you don't use or pay off any small personal loans. This will make a dramatic difference to the amount you will qualify for. The most important piece of advice is to work out your own budget to make sure you can afford the repayments comfortably. Neither you nor the lender wants your dream home to turn into a nightmare.

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