Hi there

My fiancé and I are wanting to know what sort of first home owners loan we should look at applying for - if we're eligible for one at all.

Employment & Salary:
I work as a Legal Assistant in Sydney CBD and am currently receiving $55,000 gross salary. I have been with this firm since January 2007 (ie 3 years, 6 months). My fiancé works as a Graduate Engineer in Wollongong and is currently receiving $65,000 gross salary - however this increases by approximately 4% every 6 months until he is off the Graduate Engineer Program (he has 1.5 years left of the program, unless he finds a permanent position after the next 6 months in which case his gross salary should jump to closer to $80,000). He has been with this organisation since March 2009 (ie 1 year, 4 months).

Debt & Rent:
Neither of us have any outstanding debt. We do not own credit cards (although we are looking at possibly obtaining one in the near future as emergency backup funds), and we own both of our cars. My car was bought for approximately $21,000 in October 2007, which I paid off roughly half through a personal loan, and then paid the the outstanding amount in a lump sum. My fiancé's car was bought for approximately $28,000 in January 2009, and was paid for outright. I currently live at home with my parents, while my fiancé is currently renting an apartment in Wollongong for $290/week. Prior to this, he was renting a unit in Bomaderry/Nowra for $240/week. He has never missed a payment during either renting periods.

Current & Future Savings:
We currently have $10,000 in a high interest (6% p.a.) term deposit account (8-month term, first opened at the beginning of March 2010). We also have approximately $2,500 in a high interest (5% p.a.) savings account, to which we deposit $330/fortnight - we estimate to have approximately $7,000+ saved in this savings account by the end of January 2010 (the time we are hoping to buy our first home). Finally, we also have approximately $13,000 saved in another savings account (4.7% p.a) which is set aside for emergencies, to which we deposit $330/fortnight - we would prefer not to use this money, but are willing to look into using some of it if need be.

In all, we have approximately $25,000 TOTAL in savings at this point in time. This should be closer to $35,000 TOTAL by the end of January 2010.

Home we are interested in buying:
We are hoping to buy a 3-4 bedroom unit in or around the Miranda area in the Sutherland Shire (NSW). At this point in time we propose that our price limit is around $400,000.

We would be grateful if you could please let us know if we look like we're in a good position to buy in the next 6-9 months; and, if so, what sort of loan we should look at applying for given we don't have a large deposit saved yet?

Kind regards

Hi Gemma,

Thanks for your post, it is very detailed so it sure makes my job easy! From a lenders point of view your situation looks like this:

* Employment: Acceptable. If your partner changes jobs and is on probation then some lenders will not accept his situation. Best for him to stay in his current job or to change jobs well before buying. If you are borrowing over 90% then he must not be on probation.
* Income: Your incomes appear sufficient for the proposed loan amount.
* Rent history (capacity): You have a proven ability to repay debts, pay rent and save. From a lenders point of view this is excellent.
* Location: Miranda is a low risk metro location, and is acceptable to all major lenders.

Overall my advice would be for you to try to do the following:

* Savings: Your savings is excellent as it is now. If you can get it up to $37,000 or so then with the $7,000 First Home Owners Grant this will be enough for you to borrow 90% of the property value. Borrowing more than 90% is possible however the LMI is much more expensive and the choice of lenders is more limited.
* Employment: If you and your partner have been in your current jobs for 2 years or more then we may be able to get you a special loan with discounted LMI. This is a huge saving, so well worth going for if you can!
* When to apply: It is best to apply for a pre-approval when you begin to look for a home. You can begin looking now if you like and apply now. If you expect the Miranda property market to grow over the next 6 months then it may be cheaper for you to buy now and pay more LMI rather than wait and save a larger deposit.
* Who you qualify with: You will qualify with most lenders. It is more a matter of choosing the lender with the overall cheapest rate, lowest LMI premium and best service.

I hope that helps. Please feel free to ask any more questions that you have.

_________________
Otto Dargan
Mortgage Broker
Ph: 1300 889 743
The Home Loan Experts

Our most popular pages:

• Credit Score Calculator: Do the banks see you as a high risk borrower?
• LMI Calculator: Do you qualify for discounted LMI?
• Genuine Savings: The biggest hurdle for first home buyers.
• Employment letter, Accountant letter & Gift letter templates

Hi I am a newbie here, and Otto you actually solved my problem. I was a way ahead for personal loan options despite of home loan but, now I can be assure of getting home loan.

Thanks

Thanks Savana I'm glad to hear that our forum is helping you. Please feel free to ask any questions that you have as well.

_________________
Otto Dargan
Mortgage Broker
Ph: 1300 889 743
The Home Loan Experts

Our most popular pages:

• Credit Score Calculator: Do the banks see you as a high risk borrower?
• LMI Calculator: Do you qualify for discounted LMI?
• Genuine Savings: The biggest hurdle for first home buyers.
• Employment letter, Accountant letter & Gift letter templates