Home Loans - The Very Basics

I found the perfect home for us. It's a very new (1.5 year old) 2x1 with double garage. No lawn, the back of the house is paved. The owner is selling as they're migrating & asking for $339k to $349k. I've done the calculations before & any loan above $350k is beyond our means. Becoz it's a small place, the water rates & council rates are lower than the other houses in the same suburb. To build a house of the same size in the same suburb now is $379k. Established houses of the same size in the same suburb (further up north in fact) are asking more than $349k. It's only becoz they're in a hurry to sell that they reduced the price. So you can see why I think this is a good deal.

I've gone to the banks & none of them are willing to drop the required deposit to 5% for us. So it doesn't matter how much we're eligible to loan. If we don't have 10%, everything else is moot. If I have another 6 months, I would have made the 10%. But the house isn't going to wait 6 months. I even called Keystart as they require only a 3% deposit & you don't even have to pay for mortgage insurance. Unfortunately, becoz I have a property in Sg, I'm not eligible. I have 1 more bank to go to as my appointment is at 3.30 pm. But I'm not hopeful coz I'm sure all banks work pretty much the same way. Nevertheless, we'll still go for the home open tomorrow even though I'm sure it'll tug at our heartstrings to view something we know we don't have a chance with. Unless of course, we somehow win the lottery & I don't even buy. Maybe I should, huh?

So here's what I've learnt. 

1. When working out the loan amount, the banks will consider casual employment. But you must have worked in that position for a minimum of 2 years. 

2. For permanent employment, be it full time or part time, you need to have worked in the same company for 6 months to be eligible for a loan.

3. Anything below the minimum of 20% deposit will incur a mortgage insurance, which in my opinion isn't a bad thing as your mortgage will be paid for should you lose your income due to loss of job or death or disability. Based on $350k loan, minus $35k deposit, my mortgage insurance with ANZ comes to $6627. My fortnightly repayments will be $877 which is basically the same amount I'm paying for rent now ($860).

4. Even if you don't qualify, you can still try your luck & put in an application subjected to approval. But if you get rejected, it affects your credit rating & decreases subsequent chances of getting a loan approved. Bottom line I get from the bankers: don't try unless you meet all their criteria.

5. If you have a credit card or loan & make regular repayments, the bank will consider loaning you 95% of the purchase price. According to D&J, it will have a big effect on your loan amount as well. D & his colleague in the same job, with the same pay went to the same bank for assessment. D was allowed to loan $100k more becoz he had taken up loans before & didn't miss the payments.