Buying your first property can feel like a daunting task – but it doesn’t have to be especially when you have access to experts at your fingertips so don’t be afraid to talk to a mortgage broker experienced in the First Home Buyer (FHBer) side of life.
Find below some tips to get you through the initial stages of deciding on what to do and to clarify some common questions we get regularly.
Do I talk to my bank or a mortgage broker?
When in the stages of looking to obtain finance and to find out the options available to you, it is best to talk to an experienced mortgage broker. A mortgage broker is there as a friend to you and your family, looking out for your best interests when it comes to finance.
Many finance brokers generally provide their services free of charge to you unless in the off case where the situation and the purchase might be on the complex side. Any fees payable for service will be outlined prior to proceeding with any authorisation to be signed off by yourself.
It is best to be in the right position from day one, this is where dealing with a mortgage broker will be able to research your options based on a wide variety of lenders and products and finding the most suitable product option for you as opposed to you going to a specific bank and them giving you the best option they have to offer, which may not be the most suitable option for you in reality.
If you have a question regarding a mortgage broker and their services don’t hesitate to read more in depth in our article.
What is a minimum deposit?
A minimum deposit is the amount of cash funds needed to be able to input to be able make a property purchase. Once you know or have an idea of the maximum purchase price you are looking to be able to achieve, you ultimately want to aim for a 20% deposit of the purchase price as this will eliminate having to pay any LMI. As a 20% deposit is in many cases now harder to achieve we see a number of clients end up providing between 10% and 12% deposit at a minimum as when you are over an 80% LVR and in LMI territory an 88% LVR is pretty much the sweet spot so to say.
You will need to cover the following costs as well as the deposit funds Government Charges/Stamp Duty, Conveyancer/Solicitor Fee and Pre- Purchase Building and Pest inspections carried out on the property.
If you have any queries regarding how much you should save as a minimum deposit, click here to talk to your mortgage broker Gerry and he will be able to assist with answering any questions.
What is Lenders Mortgage Insurance (LMI?)
Lenders Mortgage Insurance (LMI) is a fee charged by lenders for loans which have less than 20% deposit at time of purchase. If your total Loan to Value Ratio (LVR) exceeds 80% then LMI is payable, however if your LVR is 80% or less then it is not a chargeable fee. Don’t hesitate to read more in depth in our article about Lender’s Mortgage Insurance.
How long do I need to be in a job?
With the majority of lenders so long as you have permanent employment in place at time of loan application such as part time, full time or contracted in many cases you fit their acceptable criteria. Each lender has their own criteria that needs to be met and each will have their own list of what the documentation needed will be. At a minimum you will need to supply the most recent payslip or maybe an employment contract.
If you are in a casual based role, depending on the chosen lender you will need to be able to demonstrate a minimum of 3 to 12 months employment and the income needs to be backed up by a Year to Date (YTD) figure that is suitable to the lender criteria. Some employers will like to see the previous 12 months of employment history if there has been multiple employers/job changes to get an idea of the clients employment conduct.
Your mortgage broker may request a letter from your employer on a company letterhead that outlines; your name, your address, when you started, employment type, base pay rate and minimum hours per week to show employment conduct.
The bank you have been dealing with since you were a kid, most likely will not be the most suitable option or they might not even consider you for a home loan due to your current employment situation. It is important to talk to an experienced finance broker to see your options of what is most suitable and available to you for your situation.
If you have any queries regarding your employment situation and the options available don’t hesitate to talk to your mortgage broker Gerry and he will be able to assist with answering any questions.
What is the First Home Owner Grant (FHOG) and how do I apply?
In South Australia, the First Home Owner Grant (FHOG) is a grant paid by the State Government to eligible first home owners. The payment is made only after an application has been submitted to and approved by RevenueSA or a financial institution authorised by RevenueSA to process applications.
FHOG applies to the purchase or construction of a new residential property, including a house, flat, unit, townhouse or apartment that meets local planning standards anywhere in South Australia. Applications need to be made within 12 months of completing the transaction. Applicants can complete and lodge the appropriate application form with either an Approved Agent or RevenueSA. You can complete and lodge the application form with the financial institution providing your finance as part of buying or building your home.
If you would like a to know more about the FHOG please don’t hesitate to click here to get in touch with Gerry and he can talk further should there be any questions/queries you may have alternatively for further information, please visit the How to Apply for FHOG page.
Are there special loans for First Home Buyers (FHBers)?
As it is taking a bit longer for FHBers to be able to save up enough deposit to be able to enter the property market, there are a number of mainstream lenders who acknowledge this and have loan products on offer exclusively to help out the FHBer’s for all the hard work and effort to get a sufficient deposit together. With the offers in place from the specific lenders this makes it easier and more achievable to not only obtain home ownership but also to offer a simple streamline process allowing access to sharper rates and competitive products not available to everyone else. Your finance broker will be able to advise of the special options available to you if you are a FHBer.
If you would like to know more about exclusive offers available to FHBer’s, talk to your mortgage broker Gerry and he will be able to assist with answering any questions.
How long do I have to save for?
Buying a house is exciting and can be full of emotions. You might find that saving up all your money and doing long days at work and possibly working two part time jobs is not terribly exciting with no short term reward, but the more money you are able to save up and put into the deal means less you’ll have to borrow in the long run. If you are smart with your money and combined with a good savings plan and some discipline, you’ll soon have the deposit set aside for your home. Any lender will want to see a minimum of 3-6 months of savings history that is backed up by statements and transaction history.
Ultimately you need to work out your goal, set it in stone and work backwards. After talking to a mortgage broker you will know how much exactly you will need to save to achieve your desired purchase. Once you have this worked out, it is time to calculate in how many years/weeks you wish to achieve this goal. This is worked out by the total amount needed divide that by how many weeks and you will then know what is manageable. It won’t hurt if you are able to put away more each week, there will come a time where the goal is so close you will be able to taste it!
If you would like to read about ways to build your deposit read more in our article or if you would like to find out more don’t hesitate to talk to your mortgage broker Gerry and he will be able to assist with answering any questions and provide advice.
How do I apply for the loan?
It is important when going through the loan application process you talk to an accredited mortgage broker, not only will they do all the research to find the most suitable loan product but they will basically act as your middle man between yourself and the lender. Your mortgage broker will be able to guide you through the steps and process of what documentation you need to provide and with your help be able to complete the process from start to finish.
Do I need a pre-approval?
Pre-approvals are not necessarily something you need to have in place, while most lenders if you talk to them directly may tell you otherwise. In reality it is an unnecessary hit on your credit file that can be avoided. Another thing is if you go to inspect a property at an open inspection or want to bid at an auction the acting agent may not take you or your offer seriously without providing evidence of a pre-approval in place. There is actually no stipulation around this but seen more as the agent trying to work out who is actually eligible for finance to back up the offer provided.
If you talk to an experienced mortgage broker you will be advised if this option is necessary or not and if so there will be an explanation around it. It is recommended prior to going on that mission of a house hunt to talk to an experienced finance broker about your options most suitable to you, to see some more of the steps involved to be able to achieve the greater term goals.
If you have a question regarding anything specific about anything at all spoken about or anything related to home loans click here to talk to your finance broker Gerry and he will be able to assist with answering any questions you may have.