19 Mar 10 Tips – Negotiating a home loan
1. Have a clear goal. Develop clear and achievable goals in terms of what you want to buy and how much you need to borrow.
2. Understand your budget. Know your gross income, your living expenses and the costs of your financial obligations. Understand your household budget before approaching a lender.
3. Have a deposit. Generally speaking, you’ll need to save 20 per cent of the property purchase price, plus allow another 5 per cent for legal costs, inspections and stamp duty, etc. However, some lenders can let you borrow up to 95% of the purchase price with the inclusion of Lenders Mortgage Insurance, which protects the lender in the event that you can’t repay the loan.
4. Prove you can save. A lender wants to see that you can make regular repayments on a home loan, and the ability to save is one important indicator. So put your savings into one account and contribute to that account frequently.
5.. Work on serviceability. It isn’t your gross earnings that are calculated by the lender. It’s your net disposable income, or the amount you can use for housing after taking out the living expenses, taxation and other financial liabilities.
6. Show consistent income. Lenders are uncomfortable lending to someone with an irregular employment history or long gaps between employment. Demonstrate you can stay with one employer for a few years or more, or be able to show consistent profits if you are self-employed. 7. Have a solid rental history. If you are renting, try to not move for at least six months prior to going for a loan. A lender wants to see stability in your living situation.
8. Lower your limits on credit cards. Every $1 of credit card limit stops you borrowing up to $5 of home loan. So, reduce your credit cards to one and reduce that card’s limit to what you use. Pay-off and cancel the credit card if you can.
9. Outsource the hard stuff. If you’re worried about loan selection, your credit score or questions about serviceability, a Hunter Family Wealth Wealth Manager can get you prepared before you apply.
10. Get your paperwork in order. Lenders need documents that prove who you are, where you live, how much you earn and how much rent/mortgage you are already paying. Start a file of your latest tax returns, your last three payslips and documentation of how much rent/mortgage you pay. Have your career well documented (take current references), and have a copy of your rental history. Look organised!