Being a first-time homebuyer is nerve-wracking at the best of times. Thanks to the current pandemic, it’s even more confusing and scary to be buying your first home. However, now can still be a good time for new buyers in Australia, as long as you’ve understood what you’re doing. Here are some of the most common questions from first-time buyers during coronavirus: answered.
Is the First Home Loan Deposit Scheme (FHLDS) still available?
Many first home buyers have been saving hard for a mortgage deposit over the last few years, and have been trying to reach that 20% number where you don’t have to pay Lenders Mortgage Insurance (LMI). A new option recently opened up for those looking to buy their first home: the FHLDS.
The scheme started on January 1st, and places are still available. The scheme means that eligible first-time buyers can purchase a property with a deposit of just 5% without having to pay LMI. This means you can get your home much sooner, and save for a much shorter period.
Is it harder for first-time buyers to get a home loan during coronavirus?
The ability to get a home loan will depend on your individual situation, and how much your personal finances have been impacted by the current crisis. However, data from the Australia Bureau of Statistics seem to show that it isn’t currently any tougher for first-time buyers to get that all-important mortgage. However, it is important to remember that the Australian economy wasn’t really hit hard until March, so things may change. Keep up with any news about mortgages and do your research before applying for a home loan, so you will know if things have changed and become harder for first home buyers to get the loans they need.
Is it a good time to buy an investment property? Does anyone want to rent property right now?
Now could actually be a good time to look for an investment property. Thanks to the current climate, there are bound to be plenty of options to buy great properties. As a buyer, you will be in a very strong position to negotiate. If you are buying in order to rent, make sure you buy in an area that has potential for long-term growth. There are still tenants in the market. Vacancies are low around the country, and there are plenty of stimulus packages from the government available to help people to pay their rent who might otherwise struggle, so you should be in a reasonably secure position as a landlord.
Is it true that QBE aren’t insuring borrowers from distressed sectors?
QBE is one of Australia’s largest insurance groups. QBE has temporarily suspended offering LMI to certain groups of new home loan borrowers. These groups include those working in industries like hospitality, tourism, gyms, and salons.
Luckily, the other major provider of LMI in Australia, Genworth, currently has no plans to change its usual position on LMI. They have stated that it trusts lenders to “apply responsible lending standards and assess applications on their merits.”
If you’re taking out your first home loan through the FHLDS, remember that the entire point of the scheme is that you don’t have to pay LMI, so you won’t be impacted by the decision of QBE.
Do lenders require evidence that my income is stable during the crisis?
In the current climate of the COVID-19 crisis, lenders are certain to want to scrutinise your income more closely than usual and will need to see hard evidence that your income is going to remain stable.
If you are employed in essential services, like pharmacists, or IT professionals, this shouldn’t be too much of a problem. For those not in essential services and industries not safe from coronavirus, you may have a more difficult task ahead of you to prove that your income is, and will remain, stable.
Some lenders are not accepting bonus income for borrowers who do not work in essential services unless their employer can provide a letter to confirm that this bonus will continue to be paid out at the current level.
The best course of action is to call a mortgage broker, who will be able to talk you through your current situation and help you identify any areas that may cause you a problem. When you know where these sticking points are, you can plan to counteract them.
Are valuations coming in lower than the contract price?
There are a lot of news stories about valuations coming in lower than the contract price, and this gap is proving to be a problem for some off-the-plan buyers to make up the difference.
If you’re a first-time home buyer and you’re concerned about a lower valuation, then contact a mortgage broker. They can talk through the options that might be available to you to make up this shortfall, including buying through the FHLDS.
If you’re a first-time buyer, it’s natural to feel nervous, especially in these uncertain times. If you aren’t sure how best to proceed, then your best bet is to reach out to a mortgage broker. A mortgage broker will be able to look at your current financial circumstances and advise you on how to proceed. They will be able to find you a mortgage option that will suit the current crisis but will also continue to work for you long after the crisis is over, and mortgage payments return to normal. You will still be able to buy a home as a first-time buyer, despite coronavirus, assuming your income is still stable.
Do your homework and get your finances in as good a shape as you can manage. Get all your paperwork in order, so you can prove your income is intact and stable. Check if you are eligible for FHLDS, and if you are, apply for it. This scheme will make it much easier to save the money that you need for your deposit and will help you to get into a home that you own much sooner.
Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au
Disclaimer: While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken for any errors or omissions. The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action in relation to the matters dealt within this publication, you should seek professional advice.
