The insider’s guide to home loans



The insider’s guide to home loans

When customers speak to us about buying a home, many are overwhelmed and want to know “how much can I borrow?” “will my lending history/small deposit/personal situation work against me?” “where do I even start?” or “what does that acronym mean?”

So, here’s a step by step guide on what you can expect: A home loan appointment with one of our lenders will typically take an hour to an hour and a half. The lender will ask you a range of questions, but it’s important to know there isn’t a “right” or “wrong” answer. They’re simply building your financial profile so they can help you work out how much you can afford to borrow while maintaining the kind of lifestyle you want to live.

Firstly, it’s good to come prepared. Get your documentation in order including your payslips, credit card statements and savings account statements, and come with a good understanding of your current expenses. It makes the conversation a lot easier and in some cases, you’ll be able to walk out with a pre-approval.

Be upfront about your lending history – you don’t automatically get a black mark against your name if you’ve had a bad experience. You’d be surprised to hear we see a lot of first home buyers who have had defaults on their utilities, and it’s often at the start or end of a rental lease when things can get overlooked or timings overlap.

Consider your existing credit obligations including the ones that aren’t that obvious. For example, if you’ve ever used Afterpay or an “interest free” style payment plan, it’s considered a credit application that needs to be disclosed. Paying these off can also increase your borrowing power.

You may have heard that it’s better to have saved your deposit rather than receiving it as a gift. What we’re looking for is evidence that you can save money regularly. So, if you’ve been renting, you may not have been able to save as much as someone who’s been living with mum and dad, but you can still demonstrate you are able to meet regular financial commitments.

Similarly, dual incomes aren’t necessarily “better” than single incomes – we’re just looking at total income and total expenses.

And finally, some acronyms:

  • LVR (loan to valuation ratio) – the percentage of the property’s value that you’re borrowing. So, if you have a 20 per cent deposit, your LVR is 80 per cent.
  • LMI (lenders mortgage insurance) – typically payable if your LVR is greater than 80 per cent, it protects the lender if you default on your loan.

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