3 Ways First Home Buyers Can Improve Their Borrowing Power

Are you a first home buyer looking to get a loan? Knowing the best ways to improve your borrowing power can be a daunting process. But don't worry, we're here to help! In this blog post, we'll be discussing 3 key ways first home buyers can improve their borrowing power. We'll cover how to improve your credit score, how to increase your savings, and how to find the right lender. So, if you're ready to take the first steps to improving your borrowing power, keep reading!

Understand Your Credit History

Understanding your credit history is an important part of improving your borrowing power as a first home buyer. Your credit history is a record of how you have managed credit and debt in the past and lenders use this to assess your risk. A good credit history can give you access to more competitive rates and borrowing options, while a poor credit history can make it more difficult to get a loan.

When looking to improve your borrowing power, it's important to understand your credit history and make sure it accurately reflects your current financial situation. If there are any errors or mistakes on your credit report, it's important to contact the relevant credit bureau and have them rectified as soon as possible.

It's also important to check your credit score. Your credit score is a numerical representation of your creditworthiness and is determined based on factors such as your payment history, the amount of debt you have, and the length of your credit history. A higher credit score can give you access to more competitive rates and borrowing options.

Finally, it's important to understand the implications of missed payments, defaults and bankruptcies on your credit history. Lenders will take into account any missed payments, defaults or bankruptcies when assessing your risk as a borrower, so it's important to be aware of this and make sure your credit history accurately reflects your current financial situation.

By understanding your credit history, you can be better prepared when applying for a loan. It's important to make sure your credit history is accurate and up to date, and to be aware of the implications of missed payments, defaults and bankruptcies. Knowing this information can help you improve your borrowing power and access more competitive rates and borrowing options.

Get Pre-Approved for a Mortgage

One of the best ways first home buyers can improve their borrowing power is to get pre-approved for a mortgage. This is a process in which a lender assesses your financial situation to determine how much money you can borrow. Pre-approval helps provide an understanding of how much you can realistically afford to borrow and also provides assurance that your loan application will be considered.

When applying for pre-approval, it’s important to provide as much information as possible about your current financial circumstances. This should include details about your income, expenses, assets and liabilities. A lender will use this information to assess your capacity to make repayments. It’s also important to consider the type of loan you’re applying for, as different lenders have different lending criteria.

Another important factor to consider when getting pre-approved for a mortgage is the interest rate. Different lenders offer different interest rates, so it’s important to compare your options to ensure you’re getting the best deal. Additionally, you should be aware of any potential fees and charges that may be associated with the loan.

Finally, it’s important to remember that pre-approval does not guarantee loan approval. A lender may still decide to reject your application, so it’s important to be prepared for this possibility.

Overall, getting pre-approved for a mortgage can help first home buyers understand their borrowing power and give them a better chance of having their loan application approved. By doing your research and comparing different lenders, you can ensure you’re getting the best deal possible.

Start Saving Early

Start saving early is key to improving borrowing power as a first home buyer. Every dollar saved is one less dollar you’ll need to borrow. This is especially important for first home buyers as they often have less borrowing power than established buyers with a deposit saved.

The earlier you start, the better. Even small amounts saved can make a big difference over time. If you start saving when you are young, you can take advantage of compounding interest. This is when your savings earn interest and that interest also earns interest, and so on. It can help you grow your savings quickly.

If you’re serious about buying property, set a savings goal and work to reach it. Put aside a portion of your income each week or month and make sure that you stick to it. You should also take advantage of any government incentives which could help you build your savings. For example, the Australian Government’s First Home Super Saver Scheme allows you to make voluntary contributions to your superannuation fund to save for a first home deposit.

Regularly review your savings plan to make sure it’s working for you. Be prepared to make changes as needed. You should also think about how you can reduce your spending to free up more money for savings. A budget can help you track your spending and identify areas where you can make cuts.

Finally, it’s important to be realistic about how long it will take you to save. It may take years to save a deposit, so don’t be disheartened if you don’t reach your goal quickly. Take comfort in the fact that you’re making progress and that you’ll get there eventually.

Consider Low-Deposit Options

First home buyers face many obstacles to getting onto the property ladder, with the deposit requirement often being a huge barrier. Thankfully, there are a range of low-deposit options available to potential home buyers in Australia.

A low-deposit home loan allows buyers to purchase a property with a smaller deposit, reducing the amount of money they need to save before they can purchase a home. Low-deposit home loans often require a deposit of just 5%, meaning that buyers can purchase a property with just $20,000 if the value of the property is $400,000.

Low-deposit home loans can be a great option for first home buyers, as they can help to reduce the amount of money they need to save before they can purchase a property. However, it’s important to note that low-deposit home loans can come with higher interest rates and/or additional costs, so it’s important to research the different options to make sure you’re getting the best deal for your situation.

It’s also important to consider the long-term implications of a low-deposit loan. While these loans can help buyers purchase a property sooner, it’s important to remember that they will be paying off the loan for longer and may end up paying more in interest over the loan’s life. It’s important to consider how this could affect your ability to pay down other debts or save for the future.

Finally, it’s important to consider the eligibility criteria for low-deposit home loans. Eligibility requirements can vary between lenders, so it’s important to research the different options to make sure you meet the criteria for the loan you’re interested in.

In summary, low-deposit home loans can be a great option for first home buyers, as they can help to reduce the amount of money they need to save before they can purchase a property. However, it’s important to consider the long-term implications of a low-deposit loan and make sure you meet the eligibility criteria of the loan you’re interested in.

Got questions about your home loan? Let's talk

At Ello Lending, we understand that the process of buying your first home can be overwhelming and stressful. That's why we strive to provide our customers with the best advice and guidance throughout the process. We want to ensure that first home buyers have the best possible borrowing power and are well-informed. If you have any questions or need help improving your borrowing power, please don't hesitate to get in touch. We'd love to help you achieve your dream of owning your own home.