The First Time Home Owners Grant has provided a much needed boon to the Australian economy and has helped many Australians realize their dream of purchasing their own home But recent changes to the lending conditions may hurt potential first time home buyers making it more difficult to get that new home that they have been dreaming of.

New Lending Conditions Put A Damper On Home Ownership

New lending conditions are now requiring that first time home owners show evidence of regular savings over a period of time. Many lenders are also requiring a deposit of five per cent or more of the purchase price in addition to any federal and state given government grants. New homeowners will also be required to pay for any costs related to the purchase of the property.

Currently the First Home Owners Grant as provided by the government is $14,000 for homes that are already built and $21,000 for newly built homes. Under these new conditions potential first time home owners may once again find it difficult to afford to buy a new home. A first time home buyer who is looking at a property that costs $300,000 would be expected to pay between $15,000 to $30,000 plus additional fees when purchasing their home in addition to any Government grant money.

Preventative Measures To Prevent Economic Deterioration

The new conditions being placed on first time home buyers are a way to get back to the old days when the approval of property loans was dependent upon the new owner having cash up front. Many lending institutions would like to do away with 100 per cent financing loans altogether and have the 90 per cent loan the maximum amount able to be borrowed for a loan to value ratio.

Property Options Australia
Property Options Blog © 2006 - 2009

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In this installment of our series on tackling mortgage issue we will continue to look into common misconceptions regarding mortgages.

Your Credit Card Limits Can Affect How Much Money You Can Borrow

It’s true. You would think that the balance mattered more, but that is not so. It is the total amount of money that you are able to borrow that matters to lenders. If you have a high limit card, even if you don’t owe much on it, it can affect your ability to get a mortgage loan.

You Don’t Need To Have A Huge Down Payment

It helps, but it is not an absolute necessity. It used to be that you had to have 20% down to get a mortgage loan. Having a large down payment will help you by showing lenders that you are really serious about getting a new home and committed to the financial responsibility that it represents. It is also a bargaining tool as you can shop around for the best mortgages you can find if you have more money to throw around. If you have a higher down payment you can generally secure a lower interest loan and will often times pay lower fees as well. However, if you don’t have that much money saved up you can still get a mortgage. Many lenders off up to 100% financing.

Cheaper Is Not Always Better

If the deal sounds too good to be true, then it probably is. Beware of mortgages that offer low interest rates but tack on so many fees that you end up paying more money in the long run. Many of these “value loans” also have less flexibility and will not allow you to make lump payments towards the principal or your loan. A better option is a nice steady loan that does not have any penalties or extra fees.

We will continue to explore more mortgage issues in the next installment.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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Buying a new home is very exciting but there is a lot of work that needs to be done to ensure that everything is done right. Many Australians are taking advantage of the First Home Owners Grant, and that is a good thing. But there are a few things about mortgages that all Australians should be made aware of to ensure that their home buying experience goes as smoothly as possible.

Bad Credit Does Hurt

Every time you are late on a payment or miss a payment altogether it is recorded in your credit history. If you have bad credit it really can hurt you when you go to get a mortgage to buy a new home. It may mean that you are not able to get a loan, or that you have to pay higher percentages on the loan. Have a look at your credit history before you go in to get a mortgage. It is best if you know what is on there and avoid any unexpected, and unwanted surprises. It is also a good idea to check your credit history to ensure that it is accurate. Sometimes things get put on to hurt your credit score that are not your fault, or is entirely untrue. A good rule of thumb is to check your credit at least once a year, or every six months.

Assets Are Not Income

When it comes to getting a mortgage loan, the lending companies are only concerned with if you can repay the money back. They don’t care if you have a valuable collection of rare coins worth thousands of dollars. Unless you plan on selling those coins to repay your mortgage it is of no value at all to them. How much money you make, and not how much stuff you have accumulated that is worth money, will determine how much money you can borrow to buy a new home.

In the next installment we will continue to look at different mortgage issues.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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Buying a home is a really big deal, so make sure that you know what you are getting into. It is best to do some background research to determine what your level of affordability is. You also may be interested in getting some professional legal and financial advice. A few other things to consider when you are looking at buying your first home:

• Figure out how much money you can afford to spend on a house and don’t go above that figure. Borrowing more money than you can afford is a very bad idea.

• Take into consideration interest rate fluctuations and plan accordingly

• If you don’t understand what a fee or charge is ask. Don’t be intimidated by all the paperwork and legalese. This is your home. If anything confuses you make sure it gets cleared up to your satisfaction.

• Make sure that you can afford your monthly repayment bill.

• If you have extra money it is always a good idea to pay it toward your repayment balance.

• Always pay your payments on time.

• Be diligent in checking for hidden fees such as legals and stamp duty fees.

You May Be Eligible For The First Home Owner Grant

The government has instituted a program that gives first time home buyers a $7000 credit to help get them into their new home. There are some stipulations that apply to the First Home Owner Grant (FHOG) such as:

You must be an Australian citizen or a permanent resident or be building your first home in Australia
The property must be a recognized house, home unit or flat specifically designed for people to live in.
If you’ve already taken the grant you may not use it again.

You must occupy the home within 12 months of purchase settlement or building completion.
Application for the FHOG has to be made within 12 months of settlement or building completion.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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There is no question that the housing market is undergoing a bit of stress. Housing prices are steadily going through the roof and the market appears to be unable to keep up with supply and demand issues. With these troubles playing on the minds of consumers there is now yet another problem to contend with. Predatory lending is a problem that is on the rise due to the reduced amount that brokers are getting for commission and the low volume of sales.

When Predatory Lending Happens

Predatory lending happens when lending agencies or salespeople act in a deceptive manner in order to convince people to borrow money under unfair or abusive loan terms, or when they violate the loan terms in a way that makes it hard for the buyers to borrow against the loan.

Some examples of predatory lending involve the broker telling people who wish to borrow money to lie on their application in order for it to pass through the approval process. Brokers also will give borrowers the highest interest rate loan in order to collect larger commissions or qualify for bonuses. The number of predatory lending practices that are going on now is doubled what it was this time last year.

Another type of predatory lending involves loan application fraud wherein the mortgage broker alters the information on the application to make sure that the loan is approved. People that are less educated or in a lower income brackets are more likely to be targeted by these aggressive predatory marketing techniques.

Still Good Guys Out There

Not all brokers use predatory lending methods. There are still many good brokers out there who are just trying to make a good living. But Australians have to be diligent to ensure that they are not duped by the unscrupulous brokers. Brokers in Australia make twice what their American and British counterparts do and they are not under any obligation to provide the borrower with the best advice to help you get a fair deal.

The best advice for anyone who needs to get a loan is to shop around, know your facts and get referrals. Now that you have been made aware of this problem it should be easier to combat it.

Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 - 2008

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