Purchasing property for the first time can all be very confusing! First home buyers usually have a lot of questions so let’s look at a few basic questions and answers regarding property, first home buyers, lenders, deposit and all that other tricky stuff!

Where do I start on my First Home purchase journey?

Check out my post on the First Home Buyer’s checklist!! Start researching the areas that interest you, the type of dwelling you’re looking for, the amount of money you’re looking to borrow. Just get stuck in and do a lot of research!! The internet is a great place to start!!

now this is my idea of a first home! friends over by the pool on a summers day!!

How much deposit do I need to purchase my first home?

It varies and is really up to you! Lenders will consider lending you 100% of the purchase price if you do not have a sufficient deposit and have adequate capacity (income) to service the debt! The larger your deposit the lower your repayments will be and the larger the equity in your home will be, and if you have 20% deposit you can avoid paying Lenders Mortgage Insurance!!

What is Lenders Mortgage Insurance (LMI)

If your ‘Loan to Value Ratio (LVR)’ is above 80% then it is mandatory to pay LMI. It is a fee to protect the Lender incase you default on your home loan. The higher the LVR, the larger the LMI fee will be!

What’s an easy way I can increase my borrowing capacity?

The best way besides earning more income (lol if only it were that easy!) is to reduce your personal debt such as a reduction in your credit card limit.

How many types of Home Loans are there and which one is best for me?

There are tons!! And it’s important to find the best one for you! If you can’t afford too many rate rises then it may pay to fix your loan. If you want to pay off your loan quickly and make extra payments then you may want a variable rate with additional features such as offset.

How much is the First Home Owner Grant?

$7000 and in NSW you are exempt from Stamp Duty for purchases up to $500,000 and a reduction in stamp Duty for purchase over $500,000. Check out my post on First Home Owners Grant (FHOG)

Are there any ways my parents can help me out?

Yes! Many lenders have products where your parents can assist by using equity in their home. Products such as Family Pledge (St George) and Fast Track (Rams) can help with First Home Buyers.

What is a Non-Bank Lender?

Non Bank Lenders such as Rams and Wizard provide alternatives to the main stream Banks such as Westpac and CBA etc.. and have been very important in increasing competition in the Mortgage Industry the last 10 years. Without Non-Bank lenders we would have much less choice and even much higher fees due to lack of competition in the marketplace. Non Bank lenders have really struggled the last 6 months due to the Global Credit Crisis as they need to borrow money to lend you money and the cost of this has dramatically increased, thus seeing the closure and/or re-structure of many of these lenders. For example, Rams is now funded by Westpac. Non Bank lenders offer the same products as the Big Banks and are very competitive with rates.

What is a non-conforming lender?

If you have bad credit or poor repayment history, or have just arrived in the country or have issues elsewhere etc. then a non-conforming lender will often look ‘outside the box’ and consider your application! Basically if your application won’t be approved anywhere else, then we may try a non-conforming lender often as a ‘last resort’.

What should I be aware of when taking out a Mortgage?

Purchasing property for most of us is a huge decision so find a broker you can trust and always watch out for loans that seem too good to be true!!

What should I ask you as my Mortgage Broker?

Ask if i’m member of the MFAA! Ask about loan types, rates, comparison rates, features, fees, any additional costs involved, the process…ask anything and i’ll do my best to support you from application to settlement!

Did you read the article going around the papers this past week on “Australia’s Tightest Man”. If you missed it then it can be read here Australia’s Tighestest Man Article. Why would anyone on earth want to be like this guy suggests? Sure, he is a multi-millionaire but his suggestions aren’t for those who want to ‘live and enjoy’ life. Sure, there are people in situations that have to be frugal and are literally living on crumbs, but what this guy suggests doing is just not living. And who knows if he really does what he says and is really that miserable with his money, maybe he’s being extreme just to get publicity which is obviously working! After all, he has just written a book on being tight with money. For me, this is not what life is about, I wouldn’t ever want to be like Paul Squires and I’ll tell you why…

be smart with your savings, NOT extreme!!

Life Is About Having A Healthy Balance!!

My site promotes a healthy balance in life when it comes to both finances and fitness and not going to extremes with either. I don’t want people becoming so obsessed with their body type/size that they spend too much time in the gym, and likewise don’t want people stressing all day about their finances. There is a healthy balance in between where you can get on top of your finances and get in amazing shape and still have time to enjoy life!! We want to control our fitness and our finances so we can do the things we really want to do in life!…

You Need To Enjoy Yourself!!

How does this guy enjoy himself? By turning off his lights once a week?? Come on! What does that save you, like 5 cents?? Let’s look at some of his other suggestions: limit your friends, don’t buy jewellery, don’t buy toys for your kids, don’t buy new clothes for your kids, avoid your family…just to name a few. Is he for real?? If this guy is for real then really I feel sorry for the people around him. He must give off such negative energy! Friends are one of the most important things in life, why would anyone want to limit their friends??? This is idiotic!!

Saving is important!

I totally agree that a lot of people live outside their means and need to focus on cutting back and saving! However I would never recommend to the extremes that Paul Squires does. And ironically, he has become rich out of being tight! But personally, never in a hundred years would I ever be like this! If you want a way to find extra savings then see a good tax accountant! Friends, family, entertainment, luxuries etc.. are all part of life and a very important part of life! Life is about living and you must enjoy every day while you can, with your friends and family!! And not just save for a rainy day in 20 years time because you may not be around!! And if you are, you probably won’t have anyone to enjoy it with!!

Address your situation and set goals for improvement!

Being frugal is being negative which in turn causes stress! I believe having a healthy mind and body rewards you with discipline in other areas of your life including finances and everything else. I don’t believe you need to go to these extremes to achieve large savings or financial independence. I want you to enjoy life and have an amazing balance of fitness, travel, friends, career success, and family. It’s about finding your passions and going after them, not being frugal and wrapping yourself in cotton wool or living underground, you may as well not get out of bed in the morning!! Enjoy life today and enjoy a healthy balance going forward in everything we do!!

“Great things are not done by impulse, but by a series of small things brought together.”(Vincent Van Gogh)

Everyone has an ‘end goal’, a place of financial independence with all the time in the world to exercise and do the things we always want to do! So, how do you go from here to there? Well, you need to crawl before you can walk! You need to make a start with small steps…Make the start today by including these 7 simple steps in your everyday life!!

get started today towards your ultimate lifestyle!!

1. Lose The Fat!!

I don’t think there’s one person out there who doesn’t enjoy being in great shape or want to get into great shape! The first part of getting into amazing shape is usually to lose body fat and trim down and really is it NOT ‘easier said than done”! It just takes a little discipline with working out and your diet. Focus HARD on cardio and High Intensity Interval Training. Give it 3 or 4 months for your body to make adjustments and don’t give up on it!! Losing body fat is going to give you extra energy and make you feel great both mentally and physically!!‏

2. Add Lean Muscle!!

Adding weight/resistance training as part of your workout routine is important as muscle requires more energy to exist than fat does. Thus your body requires and uses more of its ‘stored energy’ when muscle exists! The muscle I want you to concentrate on is ‘lean’ muscle. This is muscle that is built up slowly over time and has the nice ‘defined’ look, not the big ‘puffy’ look. Work out hard in the gym but lift lower volumes and compliment weight training with cardio to get the more natural athletic looking figure. You want to look like you play a lot of sports, NOT spend all day in the gym!

3. Clean Up Your Diet!!

Diet is the building block we must utilize if we want to make changes to our bodies!! Train all you want but if your diet is poor, then the results will follow. I stick to a relatively low calorie diet, but am not fanatical about counting calories!! I believe in balance and will NEVER be completely anal about calories or working out. If you deprive yourself of something, you’ll tend to binge on it! In saying that, it’s important to get to what I call the ‘maintenance

eat plenty of fresh fruit and vegetables!!

phase’ first. (look out for an upcoming post on this). When you’re in the maintenance phase, you’ve done the hard yards and know how your body reacts, it’s more about maintaining your fit body 12 months of the year! Anyway, back to diet..I eat the normal 3 meals a day but pretty much just cut out the crap and eat fresh natural foods! Lots of chicken, meat, salads…just beware of quantity and calories.

4. Set SPECIFIC Goals!!

‘I want to lose weight’
‘I want to travel’
‘I want to meet somebody nice’
‘I want to purchase my first property’

etc…

These are NOT specific goals and you will not reach them!!

Be CLEAR & SPECIFIC!!

‘I am going to lose 5kgs within the next 2 months’
‘I am going to save $200 per week and travel to South America in November 2008’
‘I am going to make myself more available and meet 2 new people everyday’
‘I am going to do my research, use my savings, and buy my first property within the next 3 months’

Notice the difference? The second list is assertive and specific!!

5. Write Down Your Goals!!

Once you’ve set specific goals you need to write them down!! You need to drill them into your head, over and over!! Place them somewhere where they’re always in your face!! I have some goals that I’ve placed on my fridge so every time I go to open the fridge I am forced to read them over and over!! These goals should be specific and attainable but also hard to reach…set the bar high for yourself! Go over your goals with a friend and be held accountable for them if you slack off!

6. Sort Out Your Finances!!

There is no excuse for paying a higher interest rate on your home loan than what you need to! There is a lot of competition out there and a lot of products that will apply to your specific situation and help reduce your payments or pay off your loan quicker! Get motivated and discuss your situation with a professional and sort out your mortgage!
Be mindful not to run up too much personal debt such as personal loans and credit cards and if you have a few of these along with a mortgage then think about consolidating them into your home loan (there are pros & cons to this) and then make sure you cancel that debt completely. Credit cards also have zero percent balance transfer from one lender to the next, it’s just a matter of doing a little research…And there is nothing stopping you from doing this over and over and over again every 6 months!

7. Take Some Risks!!

Ok, every one has a different situation you are currently in whether it be married with children or just out of University. My posts are written from the point of view of a early thirties, single, sporty guy but that doesn’t mean if you are older and settled that you shouldn’t look at creating opportunities for yourself! If you are happy and content then that is great but keep challenging yourself to do better…you can ALWAYS do better! As we get older it’s more difficult to stay in great shape but that doesn’t mean it can’t be done! A saying that I enjoy is ‘Risk and Reward’, take some risks and enjoy the rewards! Start a business, take that overseas trip, get that promotion, get in fantastic shape!!…life is short remember!!

BE A LION!!!!

Some of you have purchased real estate before and will be familiar with the mortgage process and the part the mortgage broker plays! While others are entering their first home purchase (FHOG) and the mortgage process will seem a little overwhelming!! The mortgage broker plays an important role as middle man between the client (you) and the lender. Each client could go directly to the lender, however the mortgage broker represents many lenders and is authorized to sell loan products on their behalf. This saves the client a whole lot of time and takes much of the work out of the process for the client, thus making the client’s goal whether it be a purchase or a refinance a whole lot easier!!

When you approach me to be your broker, this is the general process that will occur!!

The Initial Contact Stage

Thinking about a pre-approval?? Or maybe you’ve already found your property?? Great!! Let me know and we can focus on applying for a loan that best suits your needs, whether by phone, in person or via email. During the initial contact, i’ll gather some brief info and let you know what documents will be required for the application and we’ll then make an appointment for an interview either at your residence or somewhere convenient. Interviews can be a little intimadating, however i’m a fairly young laid back guy…so nothing to worry about there!!

with me as your Broker, your mortgage is in great hands!!

At the Interview

We’ll discuss more detailed information on your financial situation and determine your financial needs and goals! Basically trying to figure out what you’re looking to do and how much to borrow!! We’ll estimate the loan costs which we’ll also go over and any of your concerns can also be addressed. I’ll do a general serviceability worksheet to work out how much you can comfortably afford to borrow!

What comes next??

At this stage we can either get an application and Privacy Act completed in the initial interview, but depending on your situation I may need to take all the information away and look at a number of products that may be best suitable and then present these to you at a second meeting…depending on situation and urgency!! Matching your needs to the most suitable loan product can often take a little time!

So I will then present the best loan options to you (either at the initial meeting or at a second meeting) including comparison rates and we can go over any concerns you may have!

Verification of Information

I’ll also verify all the information required for the loan application. For example, copying of payslips, payment summaries, income tax assessments, Contract of Sale, rates notices and identification for 100 Point ID Check that were provided at the initial interview.

The Loan Application

We will complete a loan application together at either the initial or second meeting and then I submit this to the lender for approval! The lender also has stages in which the application will go through, they will contact me at each stage who in turn contact you as the application moves along. Stages that the lender has are pre-approval, conditional approval, and unconditioanl (full) approval, or more information required (where they can’t make a decision based on everything submitted). For eg, conditional approval is often subject to additonal info required by the lender and/or a valuation.

The lender then makes a decision and advises me:

If the loan application is declined, I will explain the reasons that the lender has told me and may try to re-submit the application with another lender!

If the loan application is approved, I will ensure that the lenders Loan Offer and other documents are received by you!

Progressing to Settlement

You will have been liaising with your solicitor throughout the process and will arrange meeting with them to discuss a full explanation of the documents etc. The solicitor will then arrange settlement with the lender’s settlement department.

Commissions

As previously stated, there is NO cost for you to use me as your Mortgage Broker. The lender pays me a commission once the loan settles!!

Real Estate has always been regarded as one of the safest and most popular forms of investment over the years! Good old bricks and mortar! We’ve always been told to invest in real estate…it’s tangible, you can see it, it’s easier to understand than other investments such as shares, managed funds etc..and it’s relatively safe (or so we are told!). Property will always be in demand and will always be a very popular way to invest. Here are some tips and things to consider when you’re ready to purchase property for investment!

Don’t get emotional about your property!

First and foremost you are an investor. Look at property as a ways to make money! And the more money you make, the better!! You need the property to make you money, not to have all the latest fixtures and fittings!! I know a property investor who has actually never set foot in a few of his investment properties!

build your property portfolio one property at a time!!

Property moves in cycles!

Somewhere in the country property values are increasing while maybe homes in your neighbourhood are going the other way! Who says you need to purchase where you live? It’s a matter of finding the next booming area and capitalizing on it!

Positive Cashflow!

Is where the income from the investment property and all the deductions are more than the expenses the property incurs. These properties can be hard to find but they are out there, it’s just a matter of doing the research! try and keep as close to positive cash flow as you can as this will keep you in the market longer and costs you less out of your own pocket!

Negative Gearing!

Is where the income does not cover all the expenses of the investment property and this amount can be offset against your income…so in other words this amount is tax deductable. Banks also use negative gearing in their servicing calculators if you have any investment loans. Sure, it’s a tax deduction but at the end of the day you are still losing on the property…aim for as close to positive cashflow as you can!

Debt to Equity Ratio

Yes there are Banks who will give you 97% LVR to purchase an investment property but be cautious. Property is an investment and there is no certainty in any investing! There is ALWAYS a risk! What happens if you’re at 97% and the property value decreases…it can happen! Try and use 80% as a guideline, this gives you a comfort zone if something bad were to happen!

Capital Gains Tax (CGT)

There’s not much fun associated with CGT but think about it…CGT is a by-product of success!! I’d much rather take a profit and pay the CGT than have to sit on a loss for years! Remember, you always have to do better with your money!!

One Bedroom Apartments

Are often well tenanted, often near the CBD or Educational Institutions. Often yield better and have less vacancies. Are often generally more affordable so have a better entry price and are always in demand….An option that a lot of people don’t think about! Remember, don’t get emotional with your investment property!

Keeping your Property Tenanted!

There is no magic formula! Do plenty of research before buying in the area you choose. Make sure there is constant demand, a growing area, great economic structure for eg. universities, schools, shops.

Do I Manage the Property by Myself?

Why? to save $10 a week? The answer is NO!! Make sure you have a property manager you are happy with and is professional…it will save you $$$ in the long term!!

Location, Location, Location!

Can be associated with Research, Research, Research!!!! Whatever your goal for your investment property whether it be positive cashflow or capital growth in a few years, do your research and think about location!!

“To pursue your passion and never achieve is far better than never having a passion and living with regret forever” (Keith Abraham)

Achieving your goals, whether they are finance goals or fitness goals takes the right mental attitude to get where you want to be!! It’s not just enough to write your goals down and hope you can reach them. Writing your goals down is the first step, but then you need to believe in yourself and believe you can reach them! The words “I Am” are probably the two most powerful words in the English language and you can use them to reach any goal you set for yourself! “I Am” defines who you are!!

use strong powerful thoughts to go after your dreams!!

If you tell yourself you are something, you will become that something!!

Everyone has an inner voice, everyone suffers from self doubt at times and unfortunately for most of us, the inner voice portrays our negative thoughts and through this voice we often create a fear of doing something…and usually it is the fear of the unknown!! How many times do we tell ourselves we ‘can’t’ do something?? We need to control the inner voice and replace the thoughts with positive ones by using the words “I Am”!! Let’s take losing weight for example, if you keep telling yourself you are overweight and fat, then that’s what you are always going to be!! Exercise all you want but until you take control of the inner voice, you will always be overweight! We need to replace those thoughts with “I am fit and healthy” or “I am slim”!! You see, if you tell yourself “I am NOT fat” or “I am NOT going to quit this run”, your brain doesn’t recognize the ‘not’ and you have pretty much told yourself that you are fat and that you are going to quit the run!!

Use “I Am” everyday in all aspects of your life!!

“I am confident”, “I am fixing my finances”, “I am going to get this job”, “I am the best I can be”…etc etc..”I am” is such a powerful tool. Honestly, I find a lot of the whole self-help/motivational/become a better person/Anthony Robbins thing way too overwhelming but I do believe that what stops someone from doing something for the better, is usually only themselves and the fear that they have created!!

Don’t stall when it comes to making a decision!!

When it comes to making a decision, people often dwell…“should I or shouldn’t I do this?” etc…Excuses for not doing something are therefore being created, people are looking for reasons for not getting out of their comfort zone! A decision should be made promptly and by using “I am” you have already made a decision and thus the first step towards being a better person, and having a more balanced and healthier lifestyle!! In one of my earlier posts 30 Days To A Healthy Toned Body I talked about not taking several jobs a few years years back because I wasn’t sure they were what I wanted. I really needed to remove that fear that I had created and been much more focussed with my thinking!! Faced with the same decision today, I would have no hesitation in testing the waters!

Shift your way of thinking and take control!

The theme of my site is mortgage and fitness tips to maintain a healthy and balanced lifestyle, these are two things in life that we can control and to what extent is up to us! I think most people would like to maximize their health and level of lifestyle which is what finance and fitness come under right?? They are a part of our everyday life! By using positive thoughts, by using “I Am”, by controlling the inner voice, you can gain control of your lifestyle, you can get in amazing shape, you can create wealth, you can do anything!…give it a try and go after your passions in life!!

The First Home Owner market is huge and Banks are more than willing to accommodate all types of First Home Buyers! And guess what? You don’t even need a deposit these days to get into the real estate market! This post covers important basic mortgage terminology that you will learn about while purchasing your first home and the criteria that Banks look at when assessing an application for a First Home Buyer with limited deposit and/or limited employment history. Nowadays you don’t need to save for 5 or 10 years just for a deposit to gain entry into the property market!! Do your research, find out how much you can borrow, and take the first step into property ownership!!

take the first step towards owning your first property!!

Deposit

You really don’t need a deposit to purchase property as Banks will lend you 100% of the purchase price (if you meet the Lender’s criteria as discussed below) and the Govt offers you a First Home Owners Grant (FHOG) for the fees and legals. But having a deposit will save you money on both fees and repayments and the larger the deposit the greater the saving!! Your deposit can fall into one of two categories and this will affect the Lenders Mortgage Insurance Premium (LMI) which is further explained below:
1) Genuine savings: these are savings you have saved for at least a 6 month period and can be evidenced via bank account statements. Other forms of genuine savings include shares or investments but must be held in your name for at least 6 months and evidence provided.
2) Non-genuine savings: if you do not have savings it does not mean you cannot buy your first property. Banks can lend up to 100% LVR (Loan to Value Ratio). Or, you can use gifted funds from family members to lower your LVR and thus reduce your LMI premium. However the LMI premium on non-genuine savings is higher than that for having genuine savings. Gifted funds or funds from another source are known as non-genuine savings.

Loan to Value Ratio (LVR)

LVR is a term used by every institution and basically explains what percentage of your property is secured by the loan amount. The greater your deposit in either the form of genuine or non-genuine savings, the lower your LVR will be which is a good thing as this means you have more equity in your property! And the lower the LVR, the lower your Lenders Mortgage Insurance (LMI) fee will be!

To find out your LVR you divide your loan amount by the security value x 100
Let’s look at a simple example:
Purchase price: $200,000
Savings for deposit: $20,000
Therefore loan amount must be $180,000
LVR = loan/security x 100 = 90%

If you have savings of $40,000 your LVR will be 80% ($160k/$200k = 80%)

Now, there’s a big difference between having 80% and 90% LVR. Firstly, you have a lower loan balance and will therefore have lower repayments. Secondly, at 80% you do not get charged Lenders Mortgage Insurance!! (LMI)

Lenders Mortgage Insurance (LMI)

If your LVR is over 80% you’ll get slugged with LMI which is a fee charged by every institution as with the increase in LVR becomes a higher risk associated to the Bank for your loan if things were to go bad! LMI is a fee charged to protect the Bank, not the applicant! In most cases for First Home Buyers it can’t be avoided, I certainly had to pay it…it’s just one of those things! However, like many fees, it can be capitalized on top of your loan amount so you gradually pay it off along with your loan balance.
LMI is roughly 2% of your loan amount. It differs but allow for 2% is the general rule! LMI will also be more for those with no-genuine savings than for those with genuine savings.

Employment for First Home Buyers

Most Bank policies are similar when it comes to criteria for First Home Buyers or non-genuine savings applications with LVR over 95%. The policy is usually 12 months in your current job but there is flexibility when it comes to a stable job history over the last 2 years! Meaning, if you have changed jobs within the last 12 months, then your previous job history must be in the same industry going back at least 18 months. Evidence of this will need to be provided.
At 95% LVR or below, having 6 months in your current position is enough to satisfy Bank criteria and a payslip is enough to evidence this!

Serviceability

Banks use their own assessment rates to give them comfort with servicing criteria and to make sure if there are any rates increases that the applicant has adequate income to service the loan at a higher rate. Wow, it even sounds like they care right?? Well actually, afterall, if a loan goes into arrears and the applicant is forced to sell, the Bank doesn’t make anything on that loan! Ok so for servicing on a non-genuine savings product, the minimum servicability level is usually a little higher than that of a standard product.

Always remember…

Banks may very well approve you at 100% LVR but always always leave room for additional spending and worst case scenario if something were to happen to your income!! Don’t borrow so much that you have very little left over as rates can rise and the last thing you want to happen is to be a slave to your mortgage. Purchase property within your price range and use the First Home Owners checklist. Owning property should be an enjoyable first step to wealth creation!!