Here’s the scenario: you’ve just watched a home improvement show, and you’re not only feeling confident about your DIY skills (even though you’ve not touched a power tool in years), butyou’re ready to march out and buy a home. You’ve cruised the listings that Google provided you, and already have a home just around the corner picked out.
That’s a great start – we applaud your determination. Now, let’s work on getting you a home loan, since you probably don’t have all the cash available under the mattress. Here are 5 things not to do to get started.
Have no deposit
Most lenders require you to have at least 20 per cent deposit for a first home approval, and depending on your credit history or the home price, some require a deposit of up to 30 per cent. Home loans with a deposit below 20 per cent, normally requires you to pay Lenders Mortgage Insurance (LMI), which just adds to what will already be a large mortgage payment each month.
Have lots of outstanding debt
Lenders like to see that you can make your repayments. This means you should not have outstanding debts, like credit cards or personal loans that can affect your borrow-ability. Be prepared to supply bank details and income information that proves you are not trying to live beyond your means.
Don’t check your credit history
If you don’t know your credit history, it can’t hurt you – right? Wrong: your credit will be one of the first things a lender checks, and if you don’t know what you’re up against, how can you defend yourself? It is always a good idea to do a history check and look for any mistakes or items that you can fix.
Quit your job
You’re probably thinking about quitting your job, since you’ll have all those DIY projects to work on. That isn’t the best idea, if you want the bank to give you a loan; banks want to see a consistent and steady income level, and if you have no proof of how you’ll support yourself without a salary, then you will not be going home with a cheque.
Don’t worry about the responsibilities of homeownership
Home ownership looks glorious on TV, so there is nothing to worry about, right? Not exactly. Owning a home is not just a major lifestyle change – it is also quite a major responsibility, because you could end up in court or bankrupt if you can’t keep up with your payments.
For more information on how you can maximize your chances of securing a home loan, speak to a mortgage broker, such a Mortgage Choice, to help you find the right loan for your personal circumstances.