How to Secure the Funding for Your Dream Home

The process and journey of buying a house or property does not actually begin at the Real Estate Agent’s office, but with your bank or lender generally. This stage will estimate how much you will be required to pay per month as well as the size of the loan the bank will be willing to lend you. From here, you will have a gauge on the type of property you can afford to buy, and hence, your search can begin.

There are a few specifications that lenders use to assess your ability to pay back and service a mortgage. These are sometimes referred to as the ‘Five C’s of Credit’:

Credit History – To show that you’re trustworthy with a loan, a lender will request to see your credit history. Ensure that you pay all your loans on time and keep your credit cards in order to assure a speedy approval process. If you do have any black marks on your history, speak to your lender or credit assessor and they will be able to provide tips and methods you can follow to improve your credit record.

Capital – In order for the lender to have more confidence when investing in you (lending money), they need to know you have accumulated assets. These demonstrate you are responsible and have a value, making you a safer investment in the eyes of the lender.

Collateral – Collateral may come in the form of a property you already own or a guarantor’s property. This is another property that will be used as security for the loan you are applying for. This is an assurance from you to the lender, that should the situation arise where the loan cannot be paid, the lender will not lose their money.

Capacity – Your capacity is measured from your current income and any existing debts you may have. It essentially demonstrates your capability to the lender of being able to pay off your home loan. To give you an example of capacity measurements: all your debts should not exceed 40%-45% of your gross income etc.

Character – Your character will be determined by a combination of all the points above as well as subjective and objective assessments. The lender may ask questions like: how long have you been in your job? What type of job do you have? How long have you lived in your current residence? All questions to probe how secure and reliable an investment you are for the lender.

Once you have received your preapproval for the loan, you will then be able to approach your local real estate agent and begin the journey of securing your dream home.

If you have enquiries, the Hicks Real Estate team is available to call today on: 07 3355 6845.