Get informed before you buy

It always pays to have the right advice before you make a commitment to a property or other major purchase, says Angela Dye.

First published in Sydney Hills Living Summer 2015 edition

Buying a home can be stressful, but it doesn’t have to be. With an owner occupied home or an investment property most people need a loan to complete the purchase.

Using a mortgage professional to help you through the steps can give you a better understanding of how and where you fit into this process. It is important to ask questions so that you are fully informed. Being informed leads to better choices.

When buying a home you need to understand the requirements that a lender may have to

approve your loan.

Firstly, you need a deposit. Most of the lenders will require that you have five per cent in genuine savings, and as the name suggests, this is money you have saved and have held for

a minimum of three months in a bank account. Another acceptable deposit would be from the

proceeds of a sale of a property or from equity in a property that you currently own.

If you are borrowing 80 per cent or less of the purchase price, the lender may accept funds

which have come from other sources such as a gift from parents or the sale of assets. You should check the policy requirements regarding the deposit with your lender to make sure you can meet their requirements.

Parents could also help when children are purchasing a home by using the equity in their

own property. However, parents need to speak with a solicitor to understand the liability and

risks associated with using their home as security.

The second thing you need to look at is your income. In today’s market you cannot assume

that your income will automatically secure you a loan from the lender. The main two types

of income are working for an employer, and therefore PAYG, or being self-employed. Some

grants and benefits may be acceptable but this varies from lender to lender so you should

discuss this with your broker.

Your liabilities, such as credit cards, personal loans, leases and any other loans or debts, as

well as your general living costs including the number of dependants, are also considered so

that lenders get a true picture of your current financial position.

Before you sign any contracts you need to understand what your requirements are when it

comes to costs, and what liability you have once you have signed a contract. It is important that

when you purchase a property you have good legal advice. Using professionals can help make

the process less stressful for everyone.

To learn more Ask Ang.

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