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Get mortgage-ready by checking your credit, saving a deposit, knowing your borrowing capacity, getting pre-approved, and budgeting for costs.
G’day, mate! Is buying your first house on your mind? It will be a thrilling ride, but when it comes to money matters, the Thunder might strike. First, set your financial house in order. This post will take you down the path of the financial steps considered before applying for a mortgage. So sit down with your cuppa, and let’s consider these.
Your credit score is basically your financial behaviour report card. It tells lenders how good you are at honouring your debts. The higher the score, the better interest rates and number of loan options could be offered. A check-up on your credit score is always a good idea before a mortgage application. Credit Savvy and Finder are just a couple of sites where one can get a free credit report. If you are unhappy with the credit rating, it is all right; there are ways to improve it. Pay your bills on time, reduce credit card debt, and try to avoid applying for credit too often. It will be worth the effort, even if it takes a little time.
Mostly in Australia, lenders require a deposit for about 20% of the value of the property. Low deposit loans might be offered by some lenders; however, they usually come with high interest rates and lenders mortgage insurance (LMI). So, it is better to aim for a 20% deposit. The amount necessary can fluctuate depending on where you want to buy. For higher property prices like in Sydney and Melbourne, a bigger deposit might be needed when compared to smaller cities such as Hobart or Adelaide. To save for your deposit, you should start by setting up a separate savings account, limiting your non-essential expenses, and looking for means to increase income. Every little bit helps!
Borrowing capacity is the amount of money a lender would be willing to lend you, based on your income, expenses, and additional factors. To have a rough idea of your borrowing capacity, you could use online calculators or consult a mortgage broker. Talking about that, if you’re in Hobart, a local Hobart mortgage broker will give you personalized advice and help you understand your options. They will take you through an application and find a loan that suits your needs.
One of the advantages of getting pre-approval for a mortgage is that you will be clearer on how much you can borrow and will be attractive to sellers—this golden ticket communicates you are earnest and ready to buy. To get pre-approval, you have to show some proof like payslips, bank statements, identification, etc. It is also an excellent time to compare some rates and outstanding features between lenders. A pre-approval should not be seen as a guarantee; instead, it is a strong indicator of your affordability.
That aside, buying a house is just about a mortgage. There are many other margins side by side with stamp duties, legal fees, house inspection fees, and moving expenses. These, however, pile up, so they must be considered when drawing out a budget. While the stamp duty is almost 4% of the value of the property in New South Wales, in Victoria it is about 5.5%, and you can calculate the approximate values with the aid of an online calculator. Being fully prepared means you can consult a financial planner or an accountant who will help you go through an in-depth analysis of your finances, creating a budget and guarantees to stand you in the way of homeownership milestones. It’s your financial coach! For further information and expert assistance, you can check our financial planning and accounting services.
Making the move into homeownership is a momentous move, and the better prepared you are, the less stressful and more rewarding the journey will be. From checking your credit score, saving for a deposit, knowing your borrowing capacity, and getting pre-approval to accounting for additional costs, you’ll be all set for different ways of landing that dream house. Go on and begin doing these steps today; the sooner this dream builds into reality, the better! Having applied for a mortgage recently, what financial steps did you take to prepare? Share your tips and experiences in the comment section below!
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