Saving for a home is a pretty simple concept, right? It goes something like this; save, save, then save some more! But hold on … maybe you’re more ready than you realise?
While building up a deposit is an absolute must, there’s a bunch of other factors lenders look at to decide if you’re mortgage-ready – and you might already tick some of those boxes.
Matthew Clark, a RAMS home loan specialist from Wollongong in New South Wales, explains why it’s not just about the deposit digits.
Sign #1: You’ve got a good 9-5
“First cab off the rank is stable employment,” Matthew says.
“Naturally, you need to be saving for a deposit if you want to buy your first home, but having a good, stable job, that you feel comfortable in, with good remuneration, is the base for everything else,” he says.
For the vast majority, a full-time gig is how they’ll earn the cash to pay the loan back, after all.
Matthew says lenders also understand that Gen Ys tend to “job hop”, so don’t be stressed about not having 10 years with one employer under your belt!
Being self-employed doesn’t rule you out either. “With a permanent full-time job, it’s more straightforward, because your pay is set, but if you’re self-employed, it’ll require a bit more history about what you earn and getting advice early on is a good idea,” he says.
A steady job doesn’t need to mean slaving away in an office, self-employed buyers get home loans too. Picture: Tamara Graham
Sign #2: You’re smart about debt
It goes without saying that the less debt you have, the better your chances of getting a mortgage.
“But let’s be realistic, at this stage of your life, you may well have other debts,” Matthew says. How you handle them as you prepare to buy a house is what matters.
Paying off all debt – like car loans and credit cards – any which way you can, isn’t necessarily the best approach, he explains.
“Don’t try to pre-empt what a lender might want or favour. Talk to someone who understands home loans, because it’s really a case-by-case thing.
“If you have $20,000 left on a car loan, say, and someone gifts you that amount, it might not be the best idea to pay that all off. You might be better to add that $20,000 to your deposit, but it really depends,” Matthew says.
“It’s best to lay it out on the table with someone who knows what they’re doing.”
Honesty is the best policy when it comes to talking to professionals about your debts. Picture: Kate Hunter
Sign #3: You’ve got a good rental history
It may just seem like paperwork, but renters should get their name on rental agreements if possible.
“It’s never a bad thing to be able to prove a strong rental history, as it shows you’ve paid rent regularly,” Matthew says.
Paying your rent on time will keep your housemates AND your lender happy. Picture: Kate Hunter
Sign #4: You understand consistency is king!
As well as being able to point to a big fat deposit, showing how you did it matters too, Matthew explains.
“All savings are great, but being able to demonstrate you have consistently saved money, say weekly or monthly, on top of paying rent, is a good indicator to a lender that you can handle a mortgage,” he says.
Information in this material is general and does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. You should also obtain independent professional advice relevant to your financial circumstances. RAMS Financial Group Pty Limited does not endorse or assume any responsibility for the advice, content or services provided by any third party referred to in this material. RAMS Financial Group Pty Limited ABN 30 105 207 538 AR 405465 Australian credit licence 388065. Credit provider and issuer of RAMS deposit products: Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714
This article was originally published on
15 Jan 2018 at 9:00am
but has been regularly updated to keep the information current.