Five per cent deposit? How to get a bank home loan
Thu Oct 13 00:00:00 AEDT 2016
When it comes to buying a home, the deposit magic number is usually considered to be 10% of the sale price. But, in certain circumstances and upon satisfaction of lending criteria, you can get a home loan with a five per cent deposit.
Home loan approval depends on many factors, including your job, your income and your level of debt. When you apply for a home loan with only a five per cent deposit, here are some things the bank will look at in making its decision about whether to lend to you, and under what conditions.
How well you manage your money
When you apply for a home loan, you will need to demonstrate how well you can manage your money. Therefore, it’s best if the entire home loan deposit genuinely comes from you (for example, through savings over a period of time), rather than being a gift from family members. This shows the bank that you’re responsible for saving that money.
Make sure that your bank statements – both for your savings and everyday accounts – show a healthy balance and regular contributions rather than sudden lump-sum payments. This way the bank knows you have a regular source of income.
Your credit rating
Part of a home loan approval is a credit rating check conducted by the lender, so make sure you pay your bills on time. When you have a track record of making payments on time, whether it be for your mobile phone or your credit card, the bank will look more favourably at your home loan application.
If you have a credit card or personal loan, try to pay it down before you begin your home loan application. The bank will assess any other financial obligations you have, such as family support payments or store cards, before granting you a loan.
You will generally need a regular job and income to get a home loan application approved. If you’ve moved jobs recently, request a letter from your new employer confirming that you have a permanent position and are not on probation. The bank needs to make sure you have a regular source of income and will be able to afford your repayments.
Finally, always be honest in your home loan application. If you get caught including incorrect information, or even missing something small like that emergency credit card, your loan may be declined.
You’ll need to provide evidence of everything included in the home loan application from your salary to your debt levels, so there’s no point in trying to stretch the truth. The bank will see your bank statements and see where your money is going.
Get the right advice
When it’s time to apply for a home loan, Choice Home Loans is a great place to start. Your mortgage broker can take the hassle out of the home loan application process and give you all the advice you need, to get your home loan approved quickly.
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