Mortgage Loans, Home Loans, Bad Credit Home Loans

Ten steps to buying a home

Step 1: Determine how much you can afford. What you can afford depends on your income, credit rating, current monthly expenses, available deposit and the interest rate. The Home Loan calculators can help, but it is best to visit a lender to find out for sure. A mortgage broker can help you figure out how to manage and pay off your debt, and start saving for that down payment!

Step 2: Know your rights and responsibilities. Are you entitled to the First Home Owner Grant?

Step 3: Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.

Step 4: Learn about all available home loan offers in the market.

Step 5: Shop for a home. Choose a real estate agent, Wish list – what features do you want, Home-shopping checklist – take this list with you when comparing homes.

Step 6: Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale. Make sure the offer is “subject to finance” if you have not as yet been approved for a home loan.

Step 7: Get a home inspection. Make your offer is subject to a satisfactory home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.

Step 8: Shop for homeowners insurance. Lenders require that you have homeowners insurance. Be sure to shop around. Your lender will ask you top provide a certificate of currency evidencing the insurance cover and disclosing them as an interested party..

Step 9: Sign your mortgage document. You’re finally ready to go to “settlement” or “closing.” Be sure to read everything before you sign! It may be worthwhile to obtain legal advise to make sure you understand the mortgage contract.

Step 10: Welcome Home!

If you have had your property for some time and are considering a mortgage refinance, don’t be put off by all the negative publicity associated with refinancing your home loan.  If you do your homework, it is still possible to get an excellent deal with a new home loan.

While rates have gone up several times over the past 6 months,  not all lenders have passed on the same increases.

If you have a clean credit history, it is still possible to  refinance your mortgage to a rate under 6%.  Some lenders are running special offers at 5.7% and some even lower.

You do need to look at the fine print and make sure that the loan you are considering does not come with hefty penalties if you do choose to leave the lender later on.

Also one needs to consider any penalties that may be imposed by your current lender if you decide to leave.

However, in most cases it is possible to save some money with a cleaver refinance strategy and it should not cost the earth.

HOMEBUYERS and investors have nearly doubled their borrowings over the past five years, figures show.

Latest Reserve Bank of Australia figures show total housing debt hit $910.1 billion in December, up 17 per cent over 12 months and up 92 per cent since December 2004.

Total housing debt is set to reach $1 trillion within a year.

The figure itself is not a worry, but there is concern the pace of borrowing is exceeding household income growth.

AMP Capital Investors chief economist Shane Oliver says the rapid growth of housing debt could be Australia’s “achilles heel” amid any sharp rise in interest rates or unemployment, although neither is expected in the short term.

Oliver says factors driving the borrowing boom include government first-home buyer incentives in recent years, generational lows in interest rates and rising house prices as demand outstrips land releases.

“Last year we started building 135,000 houses but the underlying demand was (for) 180,000-190,000,” he says.

“This year we should start building about 155,000 houses but the underlying demand is close to 200,000.”

“It’s a worry that we have such a high level of household debt. Over the past 20 years we have gone from the low end of comparable countries to the high end,” Oliver says.

Reserve Bank figures show our housing debt is currently 135 per cent of disposable household income. Ten years ago, it was 75 per cent and 20 years ago it was 45 per cent.

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OUTER Melbourne’s surging house prices are at risk of a correction, mirroring the boom-and-bust scenario that hit Sydney’s outlying suburbs between 2003 and 2005.

In Melbourne’s southeast, house prices in Cranbourne South rose 44.6 per cent to a median of $441,000 in the year to November, while in Narre Warren North, prices increased 23.8 per cent to $635,000.

“The higher you rise the harder you fall, potentially,” said BIS Shrapnel senior economist Jason Anderson.

The economic research firm still expects Melbourne’s overall residential prices to show the strongest growth of all capital cities this year at 8.2 per cent. This compares with forecast increases of 6.8 per cent in Sydney and 5.2 per cent in Brisbane.

In 2003, price surges of up to 30 per cent rippled through Sydney’s outer fringe only to crash 15-18 per cent in 2005.

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RBA governer, Glen Stevens,  has warned “the two-speed nature of the global recovery” is a major threat to an otherwise positive outlook for 2010.

In his opening statement to the House of Representatives Standing Committee on Economics, Stevens said it appeared that world GDP grew at an annualised pace of about 4% in the second half of last year.

The expectation that a similar GDP result would occur in 2010 plus the continued thawing of international financial markets were welcome developments, he said, but “the situation is not without some challenges. I will mention just two”.

“The first is the two-speed nature of the global recovery,” Stevens said. By this he referred to the strong upturn in the Asia-Pacific economies (driven by “secularly rising incomes, generally healthy banking systems and relatively low public debt levels”) versus the more tentative rebound in the large industrial countries (driven by “the turn in the inventory cycle and temporary policy measures”).

In the latter, Stevens said growth was expected to remain modest and, as a result, these economies are likely to be characterised by a lot of spare capacity and ongoing high unemployment.

The second challenge, he said was the “increasing focus on sovereign creditworthiness“.

“We saw a brief period of turmoil regarding Dubai late last year, and more recently the public finances of Greece have been under the spotlight, with some other European countries just in the background.

“Going beyond just these instances, government balance sheets in numerous countries have taken on considerable burdens as a result of the crisis, and markets are beginning to focus on issues of sustainability. It will be a very delicate balancing act for those governments to strengthen their fiscal positions without undermining the upturn in their economies,” he said.

Stevens though was happy to report that in both these areas, Australia was relatively well-placed. “We are located in the part of the world that is seeing the most growth. And in terms of fiscal sustainability, Australia’s position is, by any measure, very strong indeed,” he added.

Since the reduction in the Federal Government First Home Owner Grant, we have seen a surge of inquiries from people looking for 100% home loans.

Unfortunately, no deposit home loans are practically non existent in today’s home loan market.

While clean credit applicants need to demonstrate some history of genuine savings with at least 5% deposit,  applicants with some history of bad credit, need as much as 20% deposit.

With mortgage refinance, the LVR restrictions imposed are even greater.  Most lenders will not consider refinances beyond 85% of the value of security property.

This problem is likely to remain with us for some time

HOME owners and home buyers can expect their monthly home loan repayments to go up by between $250 and $500 by the end of the year.

If you have a mortgage of  $500,000, your monthly repayments are going up by between $400 and $800.

Two weeks ago the RBA board opted to leave the official interest rate unchanged, and all the big banks generously “passed on” no change.

Yesterday, the formal minutes of that meeting revealed it was a very close decision. More pointedly, it left little doubt that it was merely a pause.

If economic conditions developed as expected, the minutes stated, “further adjustments to policy would probably be needed”.

By adjustments – the RBA refers to a series of rate increases.

It is quite likely that Australians will see their home loan interest rate go up by us much as 1% before the year is out.

Credit underwriting standards for home loans in Australia are set to tighten further this year.  We have seen the beginning of this during 2009 with many lenders reducing maximum LVRs and restricting cash-outs.

This is likely to continue during 2010.  Home loan buyers incurred additional costs in terms of a tightening of loan pricing, followed by non-interest fees and collateral requirements.  Some of the new restrictions include the:

• phasing out of 100% home loans;
• low doc applicants required to provide BAS statement;
• limits on cashout;
• phasing out of bad credit construction loans and owner builder loans

The news may encourage bank customers to shop their home loan around, as securing credit becomes more difficult. This week the Herald Sun reported that about 350,000 Victorians currently have blacklisted credit reports for failing to pay utility bills, skipping loan repayments or declaring bankruptcy.  The home loan options for these Victorians are quite limited.