How to Select the Right Type of Home Loan for Your Financial Situation

3 Situations Where Getting A Loan May Be A Great Idea

Depending on your financial situation, you may have difficulty getting approved for a standard home loan. Lenders often require financial documents to verify that you have a stable income. They also look at your credit standing. These details may impact your ability to obtain a mortgage. If this is Pay Off Your Mortgage Before You Reach The Morgueyour first home you may get financial help from Government initiatives.

If you have no deposit, bad credit, or no proof of income, owning a home may still be an option. Consider one of the following types of home loans for your specific financial situation. Money Smart have a wealth of information which may be helpful if you are looking for a home loan.

No Deposit Home Loans with a Guarantor

Before applying for a home loan in Australia, the typical recommendation is to save enough money to cover at least 20% of the property’s total value. However, you may not need a deposit to secure a home loan.

There are companies which work with flexible lenders throughout Australia to provide clients with no deposit home loan options. A no deposit home loan is a loan that does not require the borrower to put down an initial deposit. With these loans, you may be able to borrow up to 100% of the property’s value.

Begin Comparing the Best Home Loan Rates

Compare your options for home loans using online lending services to get the best rates. You only need to enter a few basic details to begin comparing rates.

How can you get a no deposit home loan? You need a guarantor. In most cases, the guarantor needs to be an immediate family member, quite often a parent. If you are a resident of Queensland, you can find further reading here.

Keep in mind that a guarantor does not exclude the need to prove that you have a stable income. You must show that you can complete the monthly repayments with your income.

The guarantor also needs to have enough equity in their property to secure 20% of the value of the property that you intend to purchase. This equity is used as a replacement for the deposit.

The first 80% of the loan is in the borrower’s name, while the remaining 20% includes the guarantor. This limits the guarantor’s liability should the borrower fail to complete the monthly repayments.

Low Doc Loans for Self-Employed Borrowers

One of the most significant factors that lenders look at when approving or denying a loan and selecting an interest rate is the income of the borrower. When you lack the necessary documentation to verify your income, you may struggle to obtain a home loan. However, there are ways to get a home loan without this documentation.

When you are low on documents, you may qualify for a low doc home loan. The low doc home loans are primarily intended for self-employed individuals and investors. These individuals may not have the financial records that are typically required for a standard home loan.

Instead of supplying the typical tax records to verify income, these individuals can submit a declaration form to self-verify their income. The lender may also require bank statements and recent business activity statements to help establish a record of income.

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