If you are embarking on the exciting journey of buying your first ever home, we can help. From calculating what your deposit might need to be, to outlining all the costs associated with purchasing, and from helping you source valuable information about your potential purchase to assisting you as you navigate the maze of contracts and paperwork required to execute the deal, we do more than simply sort out your loan. We guide you every step of the way.
Applying for your first home loan can be a nerve-wracking experience. Uncertainty about what is actually required can be daunting, and we can tell you from experience that your financial situation is as unique as your finger print. On top of that the borrowing landscape frequently changes as lenders clamour to service one particular niche or another.
But, when you strip it all back, the success of your first loan application comes down to two key criteria: Can you satisfy the lender that you have the ability to repay your loan (this is called a serviceability assessment), and do you have enough to contribute to your purchase (what percentage of the value of the asset you are buying are you required to borrow).
Lenders use the five C’s of credit when assessing your ability to pay back a mortgage.
Your lender will want to make sure when you’ve borrowed money, you’ve paid it back. You have to maintain a clean record if you want your loan approved, and if there are any black marks it pays to be able to find them and clean them out.
Lenders want to ensure you’ve accumulated assets, but more importantly Lenders won’t typically lend you the entire value of the home purchase. You will need to contribute a certain amount, and typically lenders like to see that you’ve saved 5% of the value of your purchase yourself. But, as with all things, there are exceptions to this rule.
This is the property you use as a security. Banks will make you provide collateral (ordinarily this is the property you are purchasing) so that in the event you fail to repay your debt they can reclaim the asset in order to sell it and reclaim what they lent you.
Capacity is your ability to repay your debt and it’s measured by your current income against existing debts, your normal expenditure and the proposed loan repayments. Each lender has a different formula, and therefore some banks will offer more money than other as a result of this calculation.
It’s a combination of all four previous C’s as well as subjective and objective assessments such as how long have you been in your job, what type of job you have and how long you have lived in your current residence.
At essential money, we collect all of this information from you in the initial stages, and then find the loan that best suits you and your objectives by shopping around a number of different lenders. By understanding how each lender will deal with your specific circumstances, we are well placed to save you time and effort by avoiding lenders that aren’t suitable or aren’t likely to approve your application.