Lenders have certain requirements before they can qualify a borrower for a mortgage. One of these is the down deposit which is typically a percentage of the final purchase price of the home. However, saving for this amount of money is often problematic for first time home buyers.
Just saving the target amount can take years and possibly even longer depending on the value of the property. This does not also take into account that homeowners are often encouraged to have more saved for emergencies and other situations.
No Deposit Home Loans
One option that is available for first time home buyers is the no deposit home loan. This makes homeownership faster and easier for those who do not have a sufficient down deposit. This option allows potential borrowers to borrow up to 120% of the full purchase price and save thousands on Lenders Mortgage Insurance (LMI).
These types of loans are actually not that much different compared to other home loan options. The ability to redraw and make additional payments each month is still available. However, potential borrowers need to be aware that interest costs tend to be higher due to the amount being borrowed.
The approval criteria is also much more strict and not everyone who applies can qualify. No deposit home loans in Perth are often available to those who have a guarantor for the loan who can secure the loan with their own mortgage.
Lenders look at the following in detail to determine if you qualify:
Credit: Lenders need to be certain of their investment and one way they do this is by looking at your credit. A high score will significantly improve your chances of qualifying.
Income: A stable employment history is a must as no deposit home loans carry a high level of risk for lenders. Employment records are all carefully reviewed.
Savings: Even if you do not have a substantial down deposit, you should still have at least some savings to show that you are able to save.
Qualifying for no deposit home loans naturally tends to be more strict given the circumstances.