How Do You Get A Home Loan?
You have made the big decision to buy a home of your own finally. Now comes the next question, how do I get a home loan or mortgage? While it may seem like an obvious answer, just go to a bank, there is quite a lot to consider before rushing off to your local branch to apply for a loan.
What You’ll Need
Let’s start with the basics first. To enable you to get a home loan, you need two essential things. Firstly, a deposit. Secondly, an income that will service your new mortgage, plus any liabilities that you have as well your living expenses. With regards to a deposit, one of the most substantial positions to be in would be to have 25% of the purchase price of the home that you ideally would like to buy. For example, if you wanted to buy a $400000.00 home, you would have needed to save $100000.00. Of that,5% would go towards the Government Fee’s (Stamp duties, etc.) and the rest would go into the actual purchase price of the home giving you the 20% equity in the property. Having that amount will generally allow you access to some of the sharpest interest rates on the market and will also avoid lenders mortgage insurance.
Next, you can go down to having 15% of the purchase price of your home, again with 5% going to government fees and the rest going into the purchase of the house. You will pay lenders mortgage insurance here, but there are still reasonable rates going in this area. From here getting a loan with less deposit is still doable, but considerably harder. There are some lenders out there that will go down as low as having 8% of the purchase price of the home for the right candidates.
Before Getting Your Loan
You have your deposit and your income, the next thing to check is are you fighting fit for your mortgage Adelaide. Post Royal Banking Commission, there are a few things that have changed, with regards to how a loan is assessed. One of the significant changes is when it comes to living expenses. Pre-commission a statement from a client into what their monthly living expenses are would have sufficed. Now most lenders, require three months bank statements, from the client’s main transaction account, and they will determine what your living expenses are. It is, therefore, a good idea, in general, to live well within your means, but even more so before you apply for a loan. Frivolous spending, because you do not have a mortgage, might be the factor that makes your loan not service through the lenders’ loan calculators. It might also mean you are not ready to take on the responsibility of a loan. The last thing to check now is what are the loan applicant credit scores like. If clients have always paid their bills on time and not applied for credit multiple times in a year, the chances are your score is good. If, however, you have defaults or unpaid debts or have applied for a lot of credit in the last two years it may pay to find out what your credit score is. There are several companies out there that will allow you to do a free check, like https://www.getcreditscore.com.au/
Finding The Right Mortgage For You
You have covered the basics and are now ready to find a Mortgage. There are two main ways to go about getting a home loan from here. The first, you can do all of your research, and reading and talking to as many sources as possible to ascertain the lenders and loan product that will work for you. Once you have done this, it is time to make appointments to go and see each of these individual lenders and find out more about the products they offer and if they suit you. More importantly also to find out if, in your current financial position, you qualify to use them. Once you have found a lender that fits you, you can then make a second appointment to go and see them at their premises to fill out applications and supply documents. The lender representative will then put your loan application in, and it will either Pre-approved or declined. If you get Pre-approval, the fun now begins, and you can go and shop for a home. When you find a house and have negotiated a contract with the vendor, the lender will look at this and either go to fully unconditional finance or decline the property. If you go to un-conditional finance, loan documents will now be issued. You will again make an appointment and go in to see your lender for the final sign up for the loan. The final stage in the process will now be the lender settling on the property you have bought. You have now obtained a home loan.
Use A Mortgage Broker
Option two is that you use a mortgage broker in Adelaide. If option 1 sounded a little difficult, it is because in this day and age, when people are time-poor, it is. At present, around 60% of Australians use a mortgage broker as opposed to going directly into a bank or lender. Brokers can be accredited with more than 40 lenders at one time, and are usually accredited with the top 15 with regards to a service and savings proposition. Why us a broker you ask? Imagine we are at the start of Option one, and instead of starting the process of data mining your information, and speaking to as many people you can, you met a banker who had worked in many banks and had just retired. This person had no bias to a particular bank and could bring you up to speed as to what is happening out in the market. They could listen to your specific scenario, and guide you to a lender that was going to serve you well, match up with your requirements and save you money. You would not need to go through the inevitable mistakes and learning curb that goes with it as you have someone on your side that has already traversed this road many a time. These are the things that a mortgage broker will do.
Unlike an advisor sitting in a bank, they will tell you if there is a competitor with a better offer. A good broker will look at your specific circumstances and find a few lenders that will suit your current circumstances and needs. That person will also check that you meet the minimum requirements that that specific lender needs form you to offer you finance. They will help you to make an informed decision on the lender you eventually choose and then assist in the process, from A to Z. Brokers will come to you, at a time of your choosing, after hours if necessary, and do all the leg work with regards to documentation, identification, signup, etc.
A mortgage broker needs to ensure they are looking after your best interests. They always have been, hence the rise in them over banks, but now it is being brought into law. The best news of all is that the lender that you eventually choose to go with will pay the broker. Let’s say that your interest rate on your new loan is 3.5%. The lender will give a portion of that to the broker, roughly 0.65% upfront and a further 0.15% ongoing trail commission for the life of the loan. So, as you can see, the lender pays the broker for the service that you will receive. For most, it is a no brainer in terms of a decision.
I hope that this has brought a little clarity with regards to “how do you get a home loan?’. If you have any questions or would like to have a chat about how to get a mortgage in Adelaide, please do not hesitate to get in touch with us.