Questions about mortgage procedure / first home buyer

Hi all,

Lately i have seen some properties on the market that i am interested in, and noticed that the market has started to cool off a bit so i might be taking advantage in the next few months and if all is well, buy my first property.

I would like to ask you what's the best way i approach the whole process. I have contacts of couple of brokers that people i know have used, but before i get into detailed discussion with them, i would like to ask you guys on what things i need to pay attention.

At the moment, I am a full time employee earning around $66k + bonus (around $7k) + super. I also have about $90k that i can use towards a deposit.

I would like to know with the numbers above, what should i expect to be my approximate borrowing capacity? I been looking at properties that are around $520k-$550k, and using the repayments calculators, i will have no problems to pay the weekly rate. Although repayments will not be a issue, i am not quite sure i can get a loan approved for that price since the deposit amount i have saved is less than 20% of the total property price.

Do you guys recommending talking to the big 4 banks directly besides dealing with brokers? Would i have any specific benefit if i go with the bank i do my everyday banking with?

Lastly, my partner is a full time student and works as a part time contractor (25 hours a week) but has a pretty high hourly rate ($50 ph). Will it make any difference if i include her in the application as well, given that she is not full time employee?

FYI, the properties i am looking for are mainly studios / 1 bedroom apartments in the inner city circle in Sydney and it would be a PPOR. I read somewhere that it is a bit harder to get a loan for a property that is less than 40 sqm. I guess this would be a different scenario for every property and handled on a case to case basis by the lender bank?

Thanks!!

 

I ran the figures you've provided through a few lenders calculators, with varying results. Some might be able to help, whilst others might not lend the money needed. A lot more information is needed to really give you useful information on the ability to borrow the amount required.

Also if you're considering apartments less than 40 square metres, you will likely need at least a 20% deposit and even then your options of lenders will be very limited.

As a broker, I'm obviously bias, but shopping around the banks yourself is unlikely to do you any favours as some simply won't lend the money, but will add credit enquiries to your credit report (not a good thing). Some may give you an approval only to reneg later when they realise the nature of the property. By using a broker you're going to get the same deal or better, plus you're more likely to go to the right lender straight away.

Existing relationships with lenders count for very little these days and sometimes they count against you.

 

This "40 sqm" rule is worrying me a bit. Currently, i am looking at a studio that is about 38 sqm in size + small bathroom + courtyard outside so i guess i am right on the limit by being slightly above 40 sqm. Will have a think about it and see if it is better to wait and see what happens with the market while obtaining that pre-approval on my application.

Thank you Peter & Rolf, you have both been very informative.

As for the application itself, do you think that i should include my partner on it or its better to have a single applicant? I have put her information in my first post.

 

It's almost impossible to give an idea on your borrowing capacity without knowing the finer details of your financial situation - including your ongoing living expenses.

Having your partner on the application should enhance your borrowing capacity.

Anything less than 50m2 in living is generally harder to obtain finance for. A 38m2 unit isn't going to allow you much scope in terms of lender choice.

Bank or broker? It's your call - do whatever you feel comfortable with. The former can only advise on their internal products - the latter should have access to all the majors as well as second/third tier lenders.

Cheers

Jamie

 

You really need to commit to one broker and they can give you options. The difference in your borrowing capacity will be large, based on some lenders taking bonus and/or contractor income, or take neither. It's not really something that's a quick guesstimate plugging your details into a comparison spreadsheet.

 

You haven't disclosed enough information to make that determination at this point. See a broker, disclose everything and then the broker will be in a better position to advise you specifically on your circumstances.

 

Regarding the size, don’t believe the agent. It’s the valuers call/measurements that count. At the risk of repeating, use a broker.