Ultimate Guide to Property and Home Loans in Australia
Why Do You Need a Property Loan?
A property loan or a home loan is made when a business or an individual needs to make a substantial real estate purchase but cannot afford to pay the whole price upfront. After making the property loan, the borrower will have to repay it over the years with additional interest until they can pay the entire loan and own the property without any other outstanding obligations to settle. If for some reason, the borrower suddenly stops paying the amount due and demandable, the lender can foreclose the mortgage.
What Should You Consider When Getting a Property Loan?
Here are some of the things you should consider when getting real estate loans:
Credit score
Your credit score is an essential factor when taking real estate loans. This credit score is determined based on your ability to pay your past loans and your previous “borrowing behaviour.” If your credit score is considered “high” or “good,” you will have a better chance of getting approved for a house loan. You can increase your credit score by paying off your previous debts and obligations. Avoiding the habit of “borrowing too much” (e.g., borrowing money to buy a new car or to travel abroad), and paying your outstanding debts before it is due are also crucial points to follow.
Debt-to-income ratio
Debt to Income Ratio (DTI) is a measurement of your debt and borrowing habits relative to your monthly income. For instance, all your outstanding loans amount to $2,000, and your monthly income is $4,000. Your debt-to-income ratio would be 20% (computed by dividing $2,000 over $4,000).
Down payment
Next, you have to consider if you will cash out money for the needed down payment. The down payment protects the lender if ever a borrower defaults in paying their debt. The borrower cannot recover what they have paid for the down payment if they decide to default on the schedule of fees. The lender prioritised you and told other borrowers that the property is not available because it is already as good as yours. So, you have to be responsible for it.
Employment history
Your employment history is essential because this will determine approval success for the house loan. Having a steady income source assures the lender that you will pay off your loan on the scheduled dates.
Find and Compare Buyer agents to help you buy a home based on your needs, lifestyle and budget.
Sydney Buyers Agent, Melbourne Buyers Agent, Brisbane Buyers Agent, Adelaide Buyers Agent, Perth Buyers Agent, Hobart Buyers Agent, Canberra Buyers Agent , Darwin Buyers Agent
How Do You Apply for A Property Loan in Australia?
Here is a list of the requirements needed in applying for loans in Australia, particularly a Property Loan:
Valid IDs
Primary IDs: those which include your photo like a passport, a government-issued license (if you are a board passer like a Teacher or a Bar Passer like a Lawyer), and driver’s license
Secondary IDs: other documentation which will prove your identities like a birth certificate, marriage certificate, or Medicare Card
A certification or proof that you are employed
Some lenders will ask you to provide a bank statement of your payroll, your most recent payslips, a COE, or Certification of Employment (which can also be a letter from your employer) as proof that you have a steady source of income.
Statement of your Assets and Liabilities
Assets: a list of properties that you own (like a car or a house in which you are the owner), your bank statements, any lease agreements that you currently have
Expenses: your monthly bills (utilities like water and electricity), your credit card statement
Liabilities: details of any outstanding obligations you may have like a car loan and all other loans you might have due and demandable
The property that you want to purchase
The lender would also ask for details of the property that you want to build or buy. It is so that they can perform their evaluation of the property and decide how much they can lend you for it.
This article originally was published on the company blog. you can read it here
Join our 24,000+ subscribers to receive Property and Finance Monthly Update