Qualifying for a loan
The general lending criteria are:
- You should have 5% – 10% in ‘genuine’ savings (genuine savings is defined differently by lenders but typically is defined as the funds that an applicant has saved themselves gradually over time. Generally speaking, lenders require at least 5% of savings in the applicant’s account over a three-month period prior to application.
- A good credit history.
- A healthy credit score.
- Stable employment.
How to improve your borrowing capacity
The following are some tips to be maximise your borrowing capacity:
- Ensure all your existing credit are paid on time with no dishonours showing;
- Reduce your credit card limits;
- Do not apply for any other credit (be it cards, cars in the months leading up to applying for a loan);
- Apply for joint loans if need be;
- Fix your rate for three to five years (see below).
Banks credit departments all have different ways of assessing income, which include variances in the percentages they will adopt, example:
Your living expenses and existing credit make a significant difference in how much you can borrow. You may need to reduce your discretionary spending in order to maximise how much you can borrow.
Most banks use 80% of rental income while some will use 100%
Banks assess PAYG salaries in the same way but apply different percentages for other types of income, including dividends, distributions, bonuses, self-employed add backs, overtime etc
Only some lenders will take the negative gearing benefit into account which can add a significant amount of additional borrowing.
In 2019, APRA changed the way banks needed to assess a borrower’s capacity to repay a loan. Lenders use different assessment rates and therefore off the same income, will lend different amounts.
Based on the above you will have noted that there are numerous items to consider and we highly recommend calling us to discuss your particular circumstances.
First Home Buyers
As a first home buyer you may be entitled to one of your State Government’s home buyer grants or concessions. On this page, you will find all grants and concessions available to first home buyers (differs per state) and a summary to help guide you to further information on the grant or concession most relevant to you.
Owning a home is often ticks ones of the boxes of a person’s material dreams – however, it can also be a mystifying and confusing experience, involving many professionals and a seemingly arcane legal process.
It’s essential to work out exactly where you stand financially. You need to know precisely what you’ll be able to afford to pay back each month, as well as what the upfront costs are going to set you back. Putting together a budget is relatively simple – as long as you’re disciplined about it.
In order to check that you are eligible for the FHOG in your State or Territory we recommend that you go to the following website: www.firsthome.gov.au
Once on the site select your State or Territory and click on the ‘Eligibility Checklist’ button and answer the questions asked to determine your eligibility. To make an appointment to see us, please click here.
Find out if you qualify
Get in touch with Charter Finance today and let us chart this journey with you!