Our chance?

Hey everybody,

Just found this amazing forum so i thought i would join.

My Partner and I are looking to apply for a home loan (To build) in August- September of this year.

We have only started to save mid Oct and too date have saved approx $6000, by August we are planning to have $17,000.

We currently earn over 80k combined.

We currently have a loan of 20k, which will of course be lower by August.
A Credit card will a $3,000 limit which has no money owing to it.


We are looking to build due to the state Gov "Tasmania" increasing the first home building grant from $7,000 to $15,000.

The Land we are looking at is $65,000 fully serviced.

And the home design we are looking at "bd, Garage, 117m2" is $122,675 fully inclusive.

So with the grant we would be looking to borrow around the 200k mark.

We have done a pre sitting with a broker and they gave us a limit of 330k approval by there calculater.

But i thought i'd see how people in the real world have found it and how they think we would go?

Regards
Aiden

Hi Aiden,

Each lender has different policies on serviceability. They take into account income, outstanding loans amounts and repayments, credit card limits, living expenses (which is dependent on if you're married, number of kids), and repayment amount on the loan you are considering taking out. In the end, borrowing capacity can vary by tens of thousands between lenders.

However, that is only part of the process. Lenders also take into account things such as your credit history, amount of savings you have, employment type, length of employment, amongst other things that can impact whether or not you are viable for a loan.

Cheers

Tom

Hi Aiden,

Welcome to the forum, hope you enjoy your stay. Tom has given some great advice already, i'll touch base on different matter that is worth noting.

It seems like your borrowing capacity is not an issue, which is great.
However your lacking the magically 20% deposit to avoid LMI cost; which is ok- as it's not easy saving up for the 20% deposit; having said that you may want to balance the benefit of paying off your personal loan early VS having a larger deposit and lowering the cost of the LMI/ getting a better rate.

What you will find is, some lenders will offer a better interest rate is btw the LVR bracket of a 85-90% loan and for loans under 80%.

Lastly, one word of advice- get your broker to compare the prices of LMI premium rather then focusing on getting the best rate, as some of the lenders that offer a lower rate makes up the difference in margin by charging you an absorbitant amount for the LMI premium.

P.s It be wise to budget for an 3% cash buffer in case there are any short falls ( valuation) + landscaping and builders upgrades etc..

Regards
Michael

Hi Michael
I would like to get your opinion on our situation:
My Fiance and I would like to apply for a construction loan of $550K. Our financial situation is as follows:
$120K - yearly combined income
$3,5K - credit card limit with $2,5K to pay off and currently making fortnightly payments of $450.00. At the moment I have interest free period on my credit card and will pay off the credit card before interest free period runs out.
$7,5K - balance transfer with CityBank, making payments of $400.00 fortnightly and account will be closed before we start getting charged interest.
My parents are gifting around $110K to us
We currently only have $2K in savings as we were not aware that we need to have savings because my parents are paying deposit on our first home.
In the past we had a loan with CBA and it was paid off in advance, no payments missed. Our rent and all bills are paid on time. We have clean credit history. CBA has rejected our home loan because my Fiance's account was in overdraft a couple of times in the past six months, I thought it was nothing major however CBA didn't think the same and we have been banking with CBA for the past 4 years.
I have heard before that its very difficult to get an approval from CBA. I am a bit disspointed with our broker as he he should know our situation and should have never applied for a loan with CBA. Now we also have a mark on our file that CBA rejected our home loan.
What should we do now? Who is more then likely to approve our loan? We need to get an approval prior to 10/01/2013.
Thanks

I can't talk as a professional but your situation sounds similar to mine and my partners.

We got our loan through westpac, we had been gifted the deposit and didn't have much of our own genuine savings but because we have been renting for 12+ month they used our rent payments as evidence of genuine savings but the gift was the actual savings....

In terms of your credit cards my understanding is that what banks look at is what your credit limits are, even if there isn't anything owing because it is debt you could get into...

But a good mortgage broker should have been able to help you with this, ours was great we spent ages with him going through all of our finances to work out what we could do.

Hi Fmac
Thank you for your reply.
We have been with the same real estate for the past four years and have rental history for the past four years. I am really bummed out that we have been rejected by CBA and we are actually looking at canceling our accounts with CBA and moving our funds to another bank.
I know what you mean re credit cards however I was advised that you need to have credit card to show banks that you can manage your debt and if you pay off your credit cards on time it will assist you with your credit rating. I am so confused
Glad to hear that your broker was great, I think our broker is very new and doesn't really know what he is doing. I would like to change to another broker but feel bad because he has done a lot for us so for- not very successful

Credit cards do help to show your history of paying off debt.

We had nearly $20,000 in credit cards when we went to apply, mostly due to automatic credit increases. We had a few thousand owing which had been a balance transfer. We cancelled a few cards and brought our limits down to $6000, enough to have our regular payments to come out of.

Good luck... I think this process was one of the most stressful I have been through, and we haven't started building yet!

Good luck.
Getting finance approved and dealing with builder is a very stressful process. We are just at very early stages.
Who are you building with? Any recommendations on builders? And what to look out for? We have been to a number of display homes and all homes look amazing however most of the things that display homes show are not included in packages. After seeing display homes - I dont want to be disspointed with our home as it will probably look nothing like a display home.

We're in WA and using Aussie living, part of Ventura.

If I had the the over I would go to a few different builders and see what they offered in terms of inclusions, cost, extras and plans. I sometimes wonder if we could have got a better deal if we had been shopping around. Also some builders are more flexible with changes, what you can pick etc.

Also it is good you know now that the displays aren't what you get, which was one of the things we liked about Aussie, the is very little in their displays that aren't included in the original price.

I would look around and decide what are the must haves (for us it was the kitchen, we upgraded to stone benches, pot draws and pushed our pantry and cupboards over the fridge to the ceiling).

Also look at what you can do after handover to save money such as flooring, window treatments etc. because of our loan we had to include these in the build.

But when it comes to it at the end consider the things that would be expensive to change, update, upgrade later and those that aren't...

Thanks for that information.
We looked at doing carpets and timber flooring after the handover and estimating to spend just under $10K- at least we can choose top quality products and don't have to pay crazy upgrade fees. I am also paranoid that builders only include basic products that look like SH*&T. Plus no builder will disclose what is included until you pay deposit, etc- which is a shame because you have no idea what you are getting yourself into. So many decisions to be made.
We are looking at four builders however after a couple of weeks of researching and comparing you just want to throw your toys and sign on the dotted line to get it over and done.

I know that feeling!

I think flooring and window treatments are one of the best ways to save money! And you get much more choice! Our flooring is costing us nearly $10,000 (that includes the tiling in the bathrooms and laundry). And our carpet is the cheapest! To upgrade to one we looked at (only a step above builders standard range) was going to be another $1000! When it was already costing about $1000 couldn't justify it. Decided to spend on the living area flooring!

Aussie seemed quite upfront about what their inclusions were. But some upgrades blew us away others were surprising! Like our bathroom sinks. We didn't want standard or the upgrade they offered, we picked something different and was less then $200 for the two. On the other hand having a wood look garage door was nearly $1000!!

I would push to include as much as possible at the beginning, like stone bench tops if you want them, pot draws in the kitchen, extending benches/vanities! The less you have to upgrade at prestart the better!

Also when you do get final drawings to sign off check everything including window locations. If you have the time take them home and spend a few days going over it just to make sure!

Also find the post on here about things you forget, some of it doesn't apply but there are some great ideas, like put the manhole in the garage!

Also I do think little things can make a big difference on appearance, we paid to have tiles mitered and a small additional laying fee to have no standard sized tiles just so we didn't have the standard 200x200 tiles.

Good luck! It is exciting and stressful!

I have a spreadsheet with so many questions but I feel really bad asking ALL the questions, some builders might think that I am crazy
Totally off the subject....looks like you are a couple of steps ahead of us and you might know....did you get a lawyer to look at your building and land contracts? Our lawyer is looking at charging us $1600- $1700.00+GST just for the land contract- I think its out of control.

Are you in WA?
We bought the land through a private sale, standard sale contract used here in WA so wasn't a worry.

I do sometimes think that having someone look at the building contract would have been smart but didn't do it. I took the opinion that they have built a lot of houses and it is a standard contract so not sure what we would have changed. After being on here I probably would have changed the amount of time they had to build and also the compensation if they don't finish on time. Though we are going to be living with my mom during the build so won't be too out of pocket.... I would advise at least taking it and reading it yourself and if things don't make sense seem odd note them and ask what they mean.

We are building in NSW so different regulations etc
I think i might get a lawyer to have a look at the documents before signing however will try to look for a more affordable lawyer.

Hi,

You will need to apply with a tier 2 bank, without seeing your credit file i can safety say if any of the major 4 banks carry out their system generated "credit scoring" you will get an auto decline within a few days... especially CBA since you overdrawn their account. Also not all banks will accept an non-genuine savings loan ( gift) so it looks like your Broker made a embarrassing rookie mistake


The good news is; as long as your LVR is under 90% ( even better if it's 80%) from the above details you can easily apply for a loan with a tier 2 lender who doesn't credit score + allow for non-genuine savings OR will take in consideration 12 moth worth of consistent"rental history" - Such as
- Suncorp
- Adelaide bank
- First mac
- Me bank
- Macquarie
etc....

Which bank to choose? it will depend on how your credit file looks like and other financial details + work history/type and LVR.

Regards
Michael

Thanks for the Advice plc and Shape.

We have also been renting for the past 3 years so hopefully that counts for something.

Oh well, time will tell.

G'day all.

Some interesting talk here that is relevant to our situation.

Shape,

I was wondering if you or others could comment on our application.

We are going through a broker who said he was confident our we would be successful with our application for $450k construction loan.

Suncorp - gift as part of deposit taking into account 24 months of rental Hx at $290 per week. (See attach for details)

Combined salary $140k

Deposit. $17.5k savings history 5 months
$8k as gift (not in our account, a signed Suncorp gift declaration form is being used)

Min deposit required 22.5k ( 5%)

11k credit cards limit.

Broker discussed with his suncorp contact and said we should make offer secure land. Bank did not give official pre approval.

We secured land at 155k 28 days subject to finance, soil, wind blah blah.
Waiting on house quote around 250k.

Have a look at these Suncorp docs and our situation and see if think we get approved.

Thanks a lot!

Also, eligible for FHOG.