The first question we are often asked by young people wanting to buy their first home is “how do we go about getting a home loan-what do we need ?” This is a fair question as it is not something a person gives much attention to until they actually think about buying a home. It is not something that is regularly addressed in schools in preparing young people for life.  

Obtaining a home loan can come down to just three important points:-  

EMPLOYMENT, CREDIT HISTORY and SAVINGS.

Employment: A good employment record in terms of time with the current employer is preferred. Most lenders require 12 months with current employer or a demonstrated history in the same industry. The status of the employment i.e. full time, part time or casual is also a factor as is the issue of probation with current employer.  

Credit History: A good credit history is always preferred by lenders. It is fine to have current loans and credit cards as long as they have a good repayment history.

It is important for a home loan seeker to understand that existing loans will reduce the amount they can borrow. Those existing loans are taken into consideration when the lender calculates how much they can lend the homebuyer. If a homebuyer has sufficient savings to payout a loan they should speak to their home loan broker first before paying out the loan. This is because that savings can be taken into consideration as a savings record while it is still sitting in a savings account. Paying out the loan can then be done in conjunction with the new home loan if it is the best option.

Savings: A demonstrated savings record will give the home loan seeker the widest range of lenders to choose from when applying for a home loan. The preferred position is to have a genuine savings record of five percent of the purchase price of the home. However these days a savings record is not essential as a number of lenders will now lend up to 100% (some even more) of the value of the home.

This is very helpful to first homebuyers who can then use the $7,000 First Home Owners Grant to meet costs associated with the loan and home purchase.