How To Find The Best Home Loan For Your Property In Western Australia
Many home buyers don’t actually know how much they can afford to borrow until they actually apply for a loan. This situation is not ideal because an informed home buyer is always in a much better position to make an offer on a property.
Up until about ten years ago it was pretty much the case that the ‘rule of thumb’ for buying a home was that you could borrow about three times your gross household income. For example, if a couple was making $110,000 between them in a year, a bank might loan up to $330,000.
This rule of thumb doesn’t apply terribly well today with house prices having grown so much. The median purchase price for first home buyer in Western Australia was $400,000.
The price will vary depending on the suburb you are interested in. For example, in 2010, the median purchase price in the popular suburb of Subiaco was $1.3 million while in Kardinya is was $600,000. You can research other Western Australian real estate prices at the REIWA web site.
The key to a smooth start with a home loan is to have a decent deposit. If you don’t have a deposit, it’s a good idea to start a regular savings program in preparation. Most lenders require recent evidence of savings before approving a loan.
A trap for many first time borrowers is to put all their savings into the purchase of a new home. To cover unexpected costs, it’s wise to have a cash reserve of at least two months mortgage repayments.
Talk to your financial institution about the deposit. Most prefer a deposit of around 10 per cent the purchase price, but this is becoming unrealistic. Deposits of 5 per cent are now more common.
Ask your lender to outline, in detail, all the fees that apply to the loan. Remember to including mortgage costs, mortgage insurance, stamp duty or any other fees that may apply. All these costs are added to your home loan. Rather than looking at how much the bank will allow you to borrow, it makes more sense to concentrate on how much you can comfortably afford.
For more information about home affordability and applying for a home loan, please visit www.reiwa.com.au
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