The. 7deadly sins of home. loans

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1 The 7deadly sins of home loans

2 So what are As borrowers look to obtain finance in the face of tightening lending criteria it is crucial to understand the potential dangers of the property market. Mistakes are often made by home buyers who may lack the experience or knowledge to secure a lending package best suited to their needs. By understanding and avoiding these 7 deadly home loan sins you will be better prepared to obtain the best home loan solution for your new home. the 7 deadly sins of home loans? 1 Impatience Looking for a property without knowing how much you can borrow 2 Lust Buying a property with your heart and not your head 3 Naivety Inadvertently failing to recognise the importance of applying for credit 4 Sloth Leaving pertinent documentation to the last minute 5 Gluttony Not allowing yourself some breathing space 6 Ignorance Not being aware of the specific product details or the relevant fees and charges 7 Inexperi(a)nce The Auction factor

3 1IMPATIENCE Looking at homes without knowing how much you can borrow can be a waste of time. There are several factors to consider when working out how much money you can borrow, such as: Income (salary/wages, rent, other sources of income) Existing debts (like personal loans and credit cards) Number of dependants Expenses (consider actual monthly expenses like bills etc) Assets Credit card limits The quickest and easiest way to work this out is by using a range of calculators which are typically located on most lenders websites. With a number in mind, you will be better placed to determine which property prices are realistic for your income and individual circumstances. Determine your budget early in the buying process through some simple research so that you are aware of the amount you are able to borrow and therefore the price range of the properties you should be looking at.

4 LUST Buying a property with your heart and not your head When it comes to home buying we can be tempted to overreach and ignore that little rational voice whispering urgently in the back of our minds. Being overly emotional about the process can often lead to an unrealistic view as to the real market value of your dream home. Ask yourself the question What can I comfortably afford?, rather than What do I really want to buy? In addition, this same emotion can distort the sale value of your own home if you are selling this prior to buying a new residence. Do some research on the median property prices for the area where you would like to live so you know whether this is a realistic option, as well as determine the average price for a house like yours if you are selling. Being armed with information will assist to take away the emotion that is tied in with buying and selling a home. Thoroughly research the value of houses in the area where you are looking to buy as well as where you currently reside if you are selling as well. Know your desired property inside and out and don t be afraid to call in the professionals for a building and/or pest inspection as it could save you thousands.

5 3NAIVETY Inadvertently failing to recognise the importance of applying for credit You must understand how lenders operate when assessing your loan application. Every time you make an application for credit, you are providing the lender with your authority to conduct a credit check. Every credit request is stored and dated for all lenders to see when they perform their own checks in relation to the loan you are applying for. While lenders have varying criteria when assessing a loan (e.g. some use credit scoring while others manually underwrite each loan); all lenders will use the information obtained in a credit report largely to base their decision. Understanding the products offered by the various lenders you are considering PRIOR to making an application is an important factor in ensuring you limit the enquiries made on your credit history. Submission of several applications with several lenders in the hope that one of them will approve your loan may have an unfavorable impact on your loan application. Lenders are wary of customers that shop around for finance as this can be indicative of you being declined with several providers. If you have made a few credit enquiries in recent times you can obtain a copy of your credit file which can be done at no cost at You are then able to see what the lender sees. Researching your preferred lender and understand exactly what is required prior to submitting an application will not guarantee your loan is approved but it should make the process less stressful for you. Ensure you understand the product and the lender before submitting your application and avoid shopping around with multiple lenders.

6 SLOTH Leaving pertinent documentation to the last minute The process of applying for a home loan requires the applicant to furnish various documentation required for purposes of identification, income support, and suitability to a loan. All too often applicants are not prepared with what is required by the lender which can significantly delay the loan approval process. Some of the common documents all applicants on a loan should have available when submitting a loan application include: Current and previous payslips or group certificate Council rates and/or utility rates e.g. water, electricity Information on your assets and liabilities Correct forms for applying for the FHOG or stamp duty concessions Your lender can assist by providing a checklist of all the documents you are likely to need to have your loan application approved. If need be, don t hesitate to ask your lender to help you with your application for the First Home Owners Grant or any Stamp Duty concessions you may be entitled to in your State. Be prepared with the documents your lender will want when you submit your loan application as this will speed up the process and allow you to make the offer on your dream home sooner. Also work out if you qualify for government assistance and fill out the paperwork ahead of time.

7 5GLUTTONY Not allowing yourself some breathing space If you try and squeeze every last cent out of your earning capacity in order to meet the affordability criteria required by your lender, you may end up biting off more than you can chew. Lenders have an obligation to ensure the loan they provide to borrowers is not unsuitable and is within your ability to repay. Homebuyers must be careful not to overextend themselves when it comes to borrowing, and this involves identifying all debts and living expenses. Assess your individual circumstances carefully before you take the plunge and get a mortgage. As basic as this sounds, you should only borrow what you can comfortably afford to repay. Some factors to consider: Job stability & longevity Number of dependants (and their stage in life - school fees, university fees) Outgoings including car payments, gym membership, travel costs etc which all serve to reduce your monthly disposable income Interest rate rises can you afford your repayments if interest rates rise? Bear in mind that since October 2009, interest rates have risen by an average by 1.50% Your stage in life are you considering starting a family? Can you make your repayments with the loss of a source of income? Lifestyle if you enjoy evenings out and long vacations over the summer then budget for this prior to taking on the responsibility of a mortgage Circumstances change, and factoring all existing living expenses and incorporating some breathing space between your mortgage payment and the impact various external forces may have upon your mortgage payment, is crucial. After all, there s more to life than simply living to pay your mortgage!

8 6IGNORANCE Not being aware of the specific product details or the relevant fees and charges Fees and charges are a part of most home loans and always have been. Understanding the various charges associated with the loan you choose, or the loan that has been suggested to you by your lender or broker, is an essential part of securing the most appropriate solution for you. Beware of just looking at the interest rate as these can have higher fees which may not be displayed in the marketing flyers and can be a hidden trap to inexperienced borrowers. When considering low interest rate loans (rates below the lenders standard variable rate), you need to consider things like: The duration of the introductory or honeymoon period The interest rate your loan reverts to after the introductory period The associated fees on this product compared to others Consider the impact of the home loan, the associated interest rate and the fees & charges are you getting the best deal? Will you still be able to comfortably afford your mortgage payments?

9 7INEXPERI(A)NCE The Auction factor One of the defining characteristics of the Australian property market is the auction. Purchasing your property at auction can be a tricky process, particularly for the novice, and the key to succeeding at auction is preparation or representation by experts. Get some experience. Go to an auction. Then go to another one! They don t charge you for the privilege of being there, and you will gain valuable information about how the process works and what you will need to look out for when it is your turn. Hire a professional Hiring an experienced agent to act on your behalf may be the best route for those lacking a true understanding of the process. This will ensure you do not exceed your highest bid in a sudden rush of adrenalin. It will also allow you to stay protected from the various nuances associated with this popular mode of property exchange. This boils down to knowledge and experience. Do your research, bid with confidence and don t exceed you maximum limit. You never know things could work out very favourably for you!

10 Empower yourself to avoid the 7 deadly sins of home loans Finding the right information to make a good home loan decision need not be difficult. State Custodians offers up-to-the-minute Australian mortgage information online anytime. What s it really worth? What s your suburb s growth like? Our FREE comprehensive property reports answer all your questions. How much will it cost? 18 different rates calculators help you work out stamp duty, weekly repayments and much more. Ask Heidi Still not sure? Heidi Armstrong separates fact from fiction with easy-to-use video tutorials. Apply online Apply online for FREE instant pre-approval and kick-start your home loan application today. Click on an icon (above) to go directly to that page online. Visit us today: statecustodians.com.au