Money & Living
There’re a few reasons why you might be thinking of buying a new place.
There’s lots to consider, we know. But we’re here for you. And we’ll walk you through the first steps towards getting borrower ready and owning a home.
There’re a lot of moving parts involved in buying a house. And, to be totally honest, it’s rarely a stress-free experience.
But the process can be made much simpler. By knowing how to prepare for a home loan, the process can be more straightforward and can help to avoid any unexpected roadblocks.
So, let’s dive into it.
Assess your spending
If you’re seriously thinking about home ownership, it’s important to take a step back and look at your current spending habits.
It’s a little obvious, but you’re not going to get your hands on some shiny new house keys if you don’t save.
This doesn’t mean you need to dramatically change the way you spend your money. But it might mean you need to exercise some caution with your purchases and reduce how frequently you part ways with your hard-earned cash.
For example, maybe you could cut back on some of the luxuries in your life. For a lot of people, this generally means less eating out or food delivery, limiting entertainment expenditure, and minimising larger purchases.
You need to demonstrate that come crunch time, you’ll be able to meet your mortgage repayments and proving you can responsibly manage your money will certainly help.
Get to know your credit
If you intend to get a home loan – and let’s be honest, you’re reading this, so you probably are – lenders will want to know you’ve got a good credit history and that you’ll be able to pay back the money you’ve borrowed.
Applying for a home loan will always trigger banks the lender to have a look through your credit file. In a way, your credit file is like a resumé that dictates whether you qualify or not.
If you have a history of unpaid bills, late payments, bankruptcy, or an excess of loan applications, you might have a tough time getting loan approval.
If your credit file isn’t looking great, it can be improved. By consistently meeting your future obligations, such as paying bills on time, you’re likely to raise your credit score.
It’s important to check your credit file regularly to make sure you’re not receiving any unfair or incorrect results. Any discrepancies can be fixed up and doing so will likely elevate your credit rating.
Do your homework
At the risk of sounding like your primary school teacher, do your homework!
Getting borrower ready is no walk in the park and requires patience and diligence. But it can be made so much simpler by knowing where you stand in the housing market and what happens during the home loan process.
And in the end, a bit of homework usually gets great results!
Firstly, it’s crucial to know what your potential “borrowing power” is. Borrowing power is a combination of your income, credit history, and your monthly living expenses like bills, groceries, clothes, subscriptions, healthcare, childcare, and education costs.
Calculators, like this one right here, will help you estimate your borrowing power. Remember to include all your regular payments, even the stuff on direct debit that you might otherwise not give much thought to. That includes things like streaming subscriptions, gym memberships, and insurance.
It’s also worth knowing what you might be eligible for. If you’re entering the property market for the first time (congratulations by the way); you might qualify for a first home buyer incentive or even the First Home Loan Deposit Scheme.
If so, your experience as a soon-to-be borrower might be helped significantly, which gets you that much closer to becoming a homeowner.
To figure out if you’re eligible for assistance, the best thing to do is to go through the prequalifying process.
Pre-qualifying is a simple and fast process that can use to you figure out how much you can borrow before you apply for a home loan.
It’s free and pre-qualifying won’t trigger any credit checks. You don’t need to provide paperwork and going through the process will have no impact on your borrowing history. There’s really no excuse not to! And you can do it right here.
Pre-qualifying will give you good idea of what you can realistically achieve in your house hunt. Knowing where you stand will help you to narrow down which type of properties and suburbs might suit you best.
This process will also estimate your potential fees like stamp duty and lenders mortgage insurance (LMI), giving you a clearer picture of what your home loan might cost you.
There’s a lot that goes into getting a home loan. While it can be incredibly rewarding, it can take time.
So, if you think about home ownership as a marathon rather than a sprint, then getting prepared to borrow is like limbering up and stretching pre-race.
If you’re hoping to make waves in the property market, being prepared will set you up to succeed.
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