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Questions you have as a first time buyer, given the current climate

It’s an unusual time for you as a first home buyer. Not only are you trying to work out how to actually buy a property, but you’re doing it in an uncertain time when the playing field has changed.

However, with all the recent conversations we’ve been having with first home buyers, we’ve been reminded of something. When it comes to purchasing your own home (something you’ve dreamed about and worked hard for a long period of time), there is little chance that *anything* will stand in your way.

COVID-19 will slow down (or even halt) the purchasing plans of some first home buyers. But for others, it won’t – especially those with secure employment who are confident their positions and income will remain the same.

Regardless of which category you fall into as a first home buyer, here we answer questions you’ve been asking yourself lately.

 

1. It is tougher now for a first home buyer to get approved for a home loan?

This will depend on your individual situation and how much the coronavirus has impacted your household’s bottom line.

If your employment is secure (and you believe this will continue), generally speaking it’s no easier or harder than it was a few months ago to secure a loan.

You may have managed to cut your discretionary spending over the last few months, and now find yourself in a better position in terms of your deposit.

Interest rates are also particularly low right now.

It’s true that lenders are taking a little longer than usual to process things, but rest assured, lenders are approving loans for first home buyers (and any other type of buyer for that matter).

 

2. Can I still borrow above 80% of the purchase price? Will I be approved for mortgage insurance?

There have been some changes to Lenders Mortgage Insurance in recent months, with one of Australia’s largest mortgage insurer temporarily suspending the approval of LMI to specific groups of new borrowers – for example: those working in the hospitality and tourism industry. There have also been changes to lender’s policies around mortgage insurance, specifically with respect to lowering the maximum loan to value ratios.

However, there are LMI providers still offering mortgage insurance to borrowers across all industries (subject to the normal qualifying/ assessment criteria). In light of these changes, it just means that if you’re planning to borrow more than 80% of the purchase price, you just need to ensure you apply for the right loan, from the right lender.

 

3. Do lenders require evidence that my income will continue to be consistent?

It shouldn’t come as a surprise to learn that lenders will scrutinise your income. The thing is, lenders were scrutinising your income prior to COVID-19 anyway – it’s all part of assessing your application for finance.

Lenders *are* analysing your application a little differently given the current climate, with each taking a slightly different approach to assessing income.

Some lenders are requesting a declaration from the borrower to confirm their employment/ income is not likely to be affected by COVID-19. Others are pairing back on what they deem acceptable income for serviceability purposes. For example, bonus income may only be included if you work in a particular industry, unless your employer can confirm the bonus will continue to be paid at the current level.

Again, it’s all about ensuring you select the lender who can provide what you’re looking for, given your personal situation. If you ask us to help with your home loan, this will happen anyway – so it’s not something to worry about.

 

4. Are valuations coming in lower than the contract price?

There’s been plenty of news stories about property valuations coming back lower than the contract price, but we’ve not seen this happen in Canberra recently.

 

5. Is now the right time to buy?

We can’t answer that question for you, because only you know what’s best for you.

However, if it’s a lack of knowledge about the buying process, or uncertainty of how much you could borrow that is holding you back… then we can help!

We’ve been spending a lot of time helping first home buyers get ready to buy. That is, we’ve been teaching clients about the buying process, explaining different lending options and providing all the information they need to make informed decisions. That way, when things settle down and buyers feel like it is the right time to buy for them personally, they’ll be well positioned financially to make their offer.

Buying your first home can be a bit overwhelming at the best of times. In this period of uncertainty, it’s more important than ever to have someone to help guide you through the process. With almost 20 years experience helping clients buy their first homes, we’d love to help you too.

 

Just provide your details here and we’ll be in touch to help explore your purchasing options.

 

 

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