Are you ready to apply for your first home loan? Buying your first home is a major life goal for most Australians. Buying a home is a big decision. People tend to get overwhelmed during the process. The more you plan about it, the more smoothly it will go.
You should start thinking of applying for your first home loan fairly early. The more planning you do, the less stressful it will be for you to go through with it. Here are some tips to help with the loan process.
Understanding Bank Requirements for a First Home Loan
Most lenders look for some kind of security before approving your first home loan. It will help evaluate how much you would be able to borrow. LVR is a term you should be familiar with.
Loan-to-value ratio (LVR) is the term which the lenders use to describe the amount you need to borrow to buy a particular property. LVR varies differently for different properties like units, residential homes, and townhouses.
Keep in mind a bank loan is also considered a promissory note. A promissory note may also be between two individuals. One question you may have is does a promissory note need to be notarized. In the case of working with a bank, a loan or promissory note is automatically notarized. If the loan is between two individuals, it is in your best legal interest to have it done.
If you own a business or have a stable income, your chances of getting your first home loan increase. During the loan process, people earning a monthly salary are highly preferred. Your salary payslips are often requested for evaluating further terms.
A good credit score, internal scoring, or your credit history are some of the terms. These play a huge role in your first home loan application. Make sure that you are not a defaulter and haven’t been late with repayments.
If you are not satisfied with the current terms of your loan and interest rates, go for refinancing. There are several benefits of refinancing, such as switching up your current loan with a new one with better interest rates and loan terms. It will help you become more financially stable by improving your monthly savings.
Setting Some Goals for Your First Home Loan
Having a set of goals can help you with your first home loan application. Make sure the goals you set are fairly realistic and achievable. Setting a budget and strictly adhering to it will help plan your lifestyle with the addition of a mortgage to it. It will help your financial scenario become more stable.
Plan out very carefully the size of the home loan you require. Due to advanced technology, you can find online calculators. First, decide the size of the loan, set the terms and an interest rate.
The calculator would provide a rough idea of monthly payments depending on the data you enter. This would act as an indication of your repayments. You would also have an idea even if interest rates rise somehow.
Deciding on the Tenure
Tenure is an important factor to be taken into consideration. People opt for a home loan tenure as short as possible so that it can be repaid quickly. Keep in mind that the shorter the tenure, the higher the EMI and vice versa.
Make sure you do not compromise on your financial goals. If you want lower EMIs, go for a longer tenure.
Final Thoughts on Your First Home Loan
From tenure to fulfilling banking requirements, you should consider certain factors before applying for your first home loan. Understanding how much you can borrow, calculating certain costs will clean a bigger picture.
Stay up to date with certain loan policies. You can also go for refinancing if you aren’t satisfied with your current loan terms. Make sure the tenure and repayments are in your favor.