Nothing compares to the immense feeling of owning a home for the first time in Australia. All it means is that there will be no more rental issues or looming evictions and you can maneuver your renovations. However, such freedom starts from home loans in acquiring the home. The process could be quite daunting for novice home owners. This guide is sought to take you through that process.

All You Need To Know While Considering A Loan For Your First Home In Australia

First step in considering a home loan in Australia

The initial step is self-introspection into your chances of getting the home loan. Your credit profile has to be impressive because the financial institutions will pay more attention into it. They want to see how well you have managed your debts in the past and what your current financial commitments are. These factors have a significant deciding-power in approving you.

To err on the side of caution, you have to attempt fixing any financial discrepancies before applying for a home loan. Get a consumer credit report to see your credit status so that you can act sooner. If you have had an abysmal credit record, it takes 5 years for your defaults to be written off and 7 years for infringements to vanish.

How much you can afford to borrow

The next step is to check the amount of loan you can afford. Make use of the home loan calculator to get an idea of how much you can afford to borrow from the financial institutions. The calculator requires basic information such as your income, loan term, interest rates and the number of the dependents you have.

You can also visit a specific home loan provider such as the Quantum Finance and enquire about the amount of money you are eligible for. The enquiry can be sent here on their home loan page.

Save for the deposit

Having enough deposit can prompt financial institutions to look at you favorably. Normally, the deposit amount is the 20% of the home property value. The Australian financial institutions will use the loan to value ratio of 80% to see if you qualify for a home loan. To increase your chances, save more deposit money. The higher the deposit is the more chances of landing that home loan.

Compare the Aussie’s home loans

There are plenty of home loan institutions in Australia and the choice of which is the best can be a harrowing experience for you. The online platform gives the opportunity to compare the home loans. Check out this first home loans guide to get a glimpse of the choices you have.

Some of the common features of home loans include the fixed and variable interest rates. These options are unfolded below:

Fixed interest rates → this is a popular choice due to the fact that interest rates remain fixed for a certain period, usually 1 to 5 years. However, there are cons of choosing this option. For instance, if the market interest rates plummet, you will still be paying more unnecessarily. And this option may also restrict additional features such as extra payments or offset accounts.

Variable interest rates → the premiums of your home loan can change anytime subject to changes in the market interest rates. If they escalate, so it is with your payments. The opportunity is when they plummet so you will also be paying less. But, before choosing this option you must put your finances in order to see if you can compensate for the unforeseen interest hikes.

Get a loan pre-approval

Once you are certain about the amount you are eligible borrow, you can approach the financial institution and request a pre-approval. This is issued once the lender finds out that you meet the preliminary requirements. It is obligation free and you can turn down the offer in case you come across a better option. Usually, the pre-approval lasts for about 3 months.

With this pre-approval, you can approach real estates and look for the best offers of properties on sale. The vendors may remove the property from the market once they see that the potential buyer is serious. There are several institutions such as Quantum Finance that you can approach for loan applications.

The home loan application is a major step. Otherwise there is no point of hunting for the best property if you do not qualify for the home loan. Once you have secured the loan, you then smile all the way to your new property. But be mindful of other steps such as the locations of your property, signing agreements and others.