Buying a home can be a fun and exciting experience but, finding the right property is just one step in the process…choosing the right home loan can be just as important!
Here are 7 tips to help make finding the right home loan as easy as possible.
Hint# 1 – Start saving for a deposit
Depending on the lender and the type of loan you choose, your required deposit can range from 5% to 20% of the purchase price of the home.
Establishing a monthly budget will help you put away enough money for your deposit.
Once you’ve assessed what your budget will support, consider having money automatically deposited from your pay or bank account to a savings account to make it easier and more convenient to put aside money each month.
If you won’t be able to come up with a large deposit, then you may need to look into a mortgage insured loan, which helps home buyers who can only make a small down payment.
Hint# 2 – Check your credit score
Having a good credit score puts you in a position to attract the best deal on your home loan so; it’s a good idea to obtain a copy of your credit report before starting the home buying process.
You will see what your credit profile looks like to potential lenders and can then take steps to improve your credit score if necessary.
Consumers can usually obtain one free credit report from each of the individual credit reporting bodies per year (additional reports are provided at a cost).
To get a copy of your credit report, you will need to contact the credit reporting bodies directly:
Hint# 3 – Get your financial documents in order
When you apply for a mortgage, you will need to provide your lender with a number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application. At a minimum, you should be prepared to provide your last two pay slips, most recent PAYG Summary, your most recent tax return or Notice of Assessment and current bank statements.
Hint# 4 – Learn how to compare offers
All mortgages are not created equal.
Even if loans have the same interest rate, there could be differences in the features and fees that make one offer more expensive than another therefore, it’s important to understand all of the components that go into determining the price of your mortgage.
So you can accurately compare the offers being made, speaking to an experienced finance broker can prove invaluable.
Hint# 5 – Understand the various loan options
Maybe your parents had a 30-year variable rate loan…maybe your best friend has an fixed-rate loan. That doesn’t mean that either of those loans are the right loan for you.
Some people might like the predictability of a fixed-rate loan, while others might prefer the lower initial payments of an introductory rate loan.
Every home buyer has their own unique financial situation and it’s important to understand which type of loan best suits your needs. This is where a good finance broker can help you navigate the loans landscape.
Hint# 6 – Be prompt in responding to your lender or finance broker
After you have applied for a home loan, it’s important to respond promptly to any requests for additional information from the lender and to return your paperwork as quickly as possible.
Waiting too long to respond could cause a delay in finalising your loan, which could create a problem with the home you want to buy.
Don’t put yourself in a position where you could end up losing your dream home, as well as any deposit you may have put down.
Hint# 7 – Don’t mess up your credit during the loan processing
It’s not uncommon for lenders to request your credit report a second time to see if anything has changed before your loan is finalised so, be careful not to do anything that would bring down your credit score while your loan is being processed…pay all your bills on time, don’t apply for any new credit cards and don’t take out any new car loans until your home loan has settled.