Not getting pre-approved before house hunting
You may be excited to start looking, but there’s a big problem if you’re not already pre-approved or conditionally approved: you won’t be prepared to make an offer, and could end up missing out on the property of your dreams.
Even worse would be putting down a deposit and signing a sales contract before getting at least conditionally approval.
Not only are you risking losing your deposit, you could end up setting your property search back by months.
Until you go through the process, you don’t know if you will be approved for your home loan, when there are so many factors the bank needs to consider.
Not speaking to a mortgage broker
Many people don’t know whether to start with the bank or a mortgage broker, the thing is, your mortgage broker is often able to negotiate a better interest rate than if you went directly to a bank first.
But more importantly, Peasy brokers are specialists in the lending policies of multiple lenders.
With access to many different types of lenders, including major banks and specialists, second-tier lenders and more, you’ll be able to navigate the tighter lending policies that now exist.
Choosing the wrong lender could be the difference between being approved and being declined.
Not saving a deposit or having a guarantor
Saving for a deposit while paying rent can be quite tricky, especially if you live in Sydney. But the number one mistake is not saving money of your own to put towards your purchase.
You should save at least a 5% deposit at minimum of the property value you’ll be shopping for, over a period of 3 to 6 months. This is what banks want to see. That said (looking at you, Sydney dwellers!), banks will look on it positively if you have been renting for at least 6 months and consider that to be genuine savings.
When you haven’t saved enough, there are still some options available.
If your parents give you the deposit (or part of it), you can find lenders who accept what they call a non-genuine savings deposit. Talk to your mortgage broker about this option for more detail.
Another option is to ask your parents if they are willing to act as a guarantor. With a guarantor on your home loan, you can avoid expensive additional fees that come with borrowing over 80% and have more to cover additional costs of home ownership.
Borrowing to your limit
Your limit is calculated as the upper threshold of repayments you can afford without financial hardship. But just because you are approved for $700,000 doesn’t mean that you should borrow to the limit.
Yet this calculation is made with the assumption that your financial situation doesn’t change.
And we all know the one constant in life is change.
Many factors can change your financial situation, even overnight. Having a child, needing a new car, taking a holiday, or even just living life.
Then there are the incidents that are outside of your control. Losing a job, or accidents that cause injury, or getting sick.
You want to be able to handle the unknowns in life financially, without being put into a struggle to pay your mortgage.
Call us on 1 800 3 PEASY or visit https://peasy.com.au/ today to avoid common mistakes on your home buying journey.