First Home Loan
Potentially when you’re buying your first home the major hurdle for many will be in making that initial commitment. Sitting around and talking about your dreams and desires will never make them happen. Taking out pen and paper and writing down what you want and a plan on how to get there will help in bringing those dreams and desires one step closer. Also, setting a realistic achievable time line will also help you keep the goal of buying your first home alive.
Saving for a home loan deposit toward the down payment in order to qualify for your first home loan can at times look as far away as a trip to Mars. For a lot of younger newlyweds covering the cost of that recent wedding and right after having to establish a home base can often whittle away any savings they may have managed to put together towards their home loan deposit.
You may want to seek out the services of an experienced professional mortgage broker when buying your first home as they can help assess the best loan for you out of the hundreds available. They will also calculate how much savings you will require to complete a property transaction. Frequently a first home buyer might think they only need the 5% deposit to get started. However there can be other fees and charges that may need to be included.
Interest rates are at an all time low in Australia and there are many financial professionals urging first home buyers to come forward and apply for the first home owners grant (FHOG). These grants and often times the concessions that go with them not only help toward a home loan purchase the extra cash can also be very useful for any extra fees required when settling the mortgage.
First home buyers who are considering looking at low deposit home loans should do their calculations carefully as there are a few issues many first home buyers are not always aware of
The minimum deposit first home buyers need to show most main stream lenders is 5%. This has to be in the way of what is known as ‘Genuine Savings’. This means you show the lender that you have had that money in a bank account in your name for at least 3 months, or you have saved that amount over 3 months, evidenced by showing them bank statements.
There are some exceptions to the above policy and if you’re interested contact your best mortgage broker to find out about the alternative options.
When buying your first home on any deposit of less than 20% the loan is going to incur what is known as Lenders Mortgage Insurance (LMI). What is lenders mortgage insurance? LMI is a risk insurance that you pay for on the banks behalf that is taken out with a Mortgage Insurance company that covers the lender in the event you default on the loan and they have to repossess the property.
Home buyers buying their first home with a low home loan deposit need to be aware that LMI can get quite pricey when your deposit is low. Although many lenders will allow you to add on the LMI to the amount you’re borrowing, they won’t allow the loan amount to go beyond 97% of the value of the property.
As LMI can get quite pricey on low deposit home loans this extra fee has to be provided for from somewhere. In most instances borrowers capitalise the fee onto their loan up to the 97% limit. That being said, because of the amount being charged for the LMI fee it will reduce the amount the lender will loan towards the actual property purchase.
If you’re in the market for buying your first home and need assistance with your first home loan, then good home loan advice is to seek out the best mortgage broker you can find, as they will be able to quickly advise you on what’s needed and what you need to do in the way of successfully applying for that first home loan.
Mortgage broker services are free as the banks pay their commissions and a good one will work with a buyer on their first home loan even though it may take an extended period to resolve all of the buyer’s issues.
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Find out how to get pre approved for your home loan