Are you looking to take that next step in your life? Have you finished browsing the net looking for that perfect place to call home?
Are you ready to become a homeowner?
Before you can actively start looking to purchase a property, the first sensible thing to do would be to check out your home loan eligibility.
Why?
Because knowing how much you can borrow not only helps you understand your own financial situation but also it stops you from getting your heart set on a place, only to find it out of your budget.
Let’s take a look at the best ways to check on your maximum home loan potential.
Calculate your Home Loan Eligibility Early To Set Your Search In the Right Area
When it comes to a home loan, the math is actually quite simple. You look at what you have coming in – your income – and you deduct your outgoings each month – your expenditure. The rest is just a matter of seeing how much you can realistically afford to pay back each month.
There are plenty of home loan calculators out there that can help you get a ballpark figure.
The main criteria that get looked at when applying for a home loan are:
Age – As harsh as it sounds, age plays a role in your home loan calculations.
Employment Status – if you are in a stable full-time job, then that is a big check in the plus column because a regular income shows the bank that you are in good standing to make your payments every month. The amount you are earning will also directly influence the amount you can borrow.
Credit Rating / Credit Card History – If you have been living a debt free life, or at least maintaining your credit card by paying off your purchases in a simple large lump sum each month, then you score maximum points. The better managed your credit card history, the better image you produce for the banks looking to lend you money.
Choosing the Right Home Loan for You
There is more to finding a home loan than just understanding your home loan eligibility. Loan types and duration are also deciding factors.
The core loan types you should be looking at:
Fixed Interest – The simplest loan. All you need to do is set your interest rate for 15-30 years and simply let your payments run. A great loan for those that are buying with the intention of staying put, and want to know exactly how much they will be paying for the foreseeable future.
Adjustable Rate Mortgages – If your credit rating is working against you, then you can counter balance this to some degree by taking a flexible interest rate loan. Here, the rate is set for a shorter period of time and will then be adjusted.
Federal Housing Administration Loan – For many people, being able to save the average 20% needed for a downpayment on a home, can be tough. With FHA home loans, you can put down as little as 3.5% on a down payment and move on with a fixed interest rate.
The only caveat with this is that you need to take out mortgage insurance, which you can spread over the life of the loan. This totals to approximately 1% of the full loan value.
Buying a Home is the Biggest Decision You Will Make
Making the decision to buy a home is one of the biggest things you will do in your life. To do so without due care and attention can be problematic.
By first understanding your home loan eligibility you can get yourself started on the next phase of your life with a clean conscience, knowing that you are not getting yourself into financial trouble.
If you need help with arranging your home loan or are looking for a quote, get in touch with us today. We are here to help.