Once you’ve decided to buy a new home, there are a few key steps you need to take before actually making the purchase. After you’ve determined your preferred property type and location, you’ll need to understand what you can afford to buy. By doing your research and knowing what you can afford, the process can be less daunting than you think.

How much should I borrow for a house?

When you know how much you can afford to borrow, you’ll have a better idea of what properties are within your reach. You might do this by using an online home loan calculator, like Suncorp Bank’s Borrowing Limit Home Loan Calculator. Though this amount won’t be exact, it may provide you with a reasonable estimate that can give you an idea of what your home-buying budget should be.

Boost your savings to reduce your loan

Remember, most home loan lenders will require you to bring a 20% deposit to the table. So if you’re able to, you may find it useful to save as much as you can to reduce the amount you borrow. This will also reduce your loan to value ratio (LVR) and the amount of interest you’ll be required to pay back over the loan’s term. Borrowing less than 80% of the total purchase price also helps you to avoid paying Lenders Mortgage Insurance, which is an insurance policy that protects your lender from loss in the event of an unpaid loan.

Make sure your finances are in order

Having your finances under control will go a long way to supporting your home loan application. Your lender will use a set of criteria to assess your application, such as your credit history and whether you’re able to pay back your loan. It may help to have:

• a proven history of savings
• ongoing, stable employment
• reduced your debts and financial commitments.

Your lender will also require you to provide proof of these things to secure the loan. You could be considered a risky candidate for a loan if your repayments are likely to exceed 30-35% of your gross income. Finding a guarantor – perhaps a parent – who can support your application and provide security may make the process easier if you’re finding it difficult to get a home loan.

Check your eligibility for government support

In Australia, federal and local governments offer grants and subsidies to eligible first home buyers. This includes reductions or exemptions from stamp duty, the First Home Owners Grant  and the First Home Super Saver Scheme.

First Home Owners Grant

The First Home Owners Grant is a one-off grant that offsets the cost of GST on home ownership for eligible first home buyers. It’s a national scheme, however the grant is funded and administered by each state or territory.  

First Home Super Saver Scheme

The First Home Super Saver Scheme  allows you to save for your first home via your superannuation fund. This could be a smart way to grow your savings by paying less tax.

Compare home loans

When you’re researching which home loan is best for you, you’ll need to work out what features you need and how much it’ll cost. By asking lenders for key facts sheets, you’ll be able to see important information side by side and understand how long the loan will take you to pay back.

Don’t forget to check the comparison rate, rather than the headline interest rate. Comparison rates take into account the interest rate, in addition to extra fees and charges, whereas the headline rate is just the basic interest rate.

Suncorp Bank offers three home loan options, with benefits such as fixed repayments and no ongoing account keeping fees. You can even estimate how much you could borrow in minutes.

Discover Suncorp Bank home loans  

Consider using a mortgage broker

If you’re having a hard time deciding which home loan is right for you, a mortgage broker may be able to help simplify your options.

A mortgage broker should have access to a variety of lenders and be familiar with their differing application criteria and processes. They’ll be able to advise you on the best loan for your personal circumstances and long-term goals. Using a qualified and respected broker could also mean that you’re able to secure a home loan more quickly than if you were doing things on your own.

Suncorp Bank’s mobile home loan specialists can provide you with obligation-free advice, so if you’re thinking about getting a home loan request a call back today.

Seek pre-approval

Seeking loan pre-approval is an important step in the home buying process. It means that, in theory, your home loan provider has agreed to lend you an amount of money to purchase a house. Although pre-approval is an important step on the road to home ownership, it doesn’t necessarily mean your loan has been unconditionally approved.

Having loan pre-approval means that you’ll know what you can afford to spend, enabling you to focus your search and negotiate or bid with more confidence. Obtaining pre-approval isn’t a requirement in the home-buying process, but it can make buying more straightforward when you do find your dream house.

If you're looking for guidance on home loan options, get in touch for a 100% obligation-free consultation. 

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Published 14 December 2020