First home buyer - any chance?

Hi guys,

I've been lurking on this forum for years.

About time I actually tried to buy a property. I respect the brokers and advice on here so thought I'd ask.

My partner and I are first home buyers.

I am 31 and an accountant.

Base salary of $120k + $30k distribution so say $150k per annum. I haven't included other commissions that we receive as difficult to predict.

My wife earns $40k per year as a hotel receptionist.

We have an 8 year old.

We have $12k saved. Yes I know this is low and am fully aware of mortgage insurance.

I had some credit problems in the past helping family out due to illness and parents being out of work. It almost killed us but we stuck at it. I will spare the sob story.

Current vedascore is 448 however improving every month. No defaults just too many inquiries. I monitor it monthly. Wife's vedascore i have no idea but I imagine better then mine.

Looking to buy a new home in nsw in spring farm south western sydney (around $500k) understand we would be eligible for $15k from osr and stamp duty concession. Could we possibly use fhog as part of the deposit? I believe we can as its payable on settlement if we use a deposit bond.

Are we jumping the gun with $12k saved? Probably and not sure that my vedascore helps due to past problems.

Current income is very solid obviously just the past coming back to haunt us.

Any advice appreciated - just concerned about property prices and how much they have risen. We could easily afford the loan just not sure we conform to banks.

Look forward to any help. I'm probably 6 months ahead but again appreciate brokers thoughts.

Cheers

Bern
 
Hi Bern

Sorry to hear of the predicament.

To cut a long story short - $12 isn't enough.

The FHOG can't make up part of the deposit - banks will want to see that you've been able to "genuinely" save at least 5% of the purchase price.

All in all - given the credit history I'd aim to come up with enough funds to cover a 10% deposit + costs (if applicable).

That way - your chances of approval are much higher (anything less than a 10% deposit is credit scored/scrutinised a lot harsher).

Cheers

Jamie
 
Don't worry about your Veda score at this point, it's good enough to get a loan and it's not the only thing lenders look at. They have their own scoring systems in place.

Your income should be sufficient to service a reasonable amount of debt, but your deposit is a problem. Ideally you need 10% of the purchase price plus the stamp duty and other purchase costs (can vary from state to state with First Home discounts).

There are lenders will which allow a 5% deposit and a lot of the LMI to be capitalised. In these cases you'd want about 7%-8% of the purchase price plus purchase costs.
 
Jamie's touched on the basics already. With your current income situation and active credit file, I'd suggest knuckling down and ride out the storm.

Build your savings until you have circa 10% deposit saved and then go from there. Be sure to let your broker know your the intricacies of your previous credit problems so they can factor this into the potential lender selection.
 
Covering three aspects of lending:
Borrowing power = A strength on your income.
Deposit = Will need more or alternative solutions (gifts, a security guarantor, etc). Double the 12k and use the FHOG and then your getting closer to where you need to be.
'Character' (credit file) = As others have said, can be worked around. FYI, time is the best solution to heal your credit file. It also helps build a deposit.

As for your concerns about property price increases, there's a mindset of missing out from first home buyers around - just note that no property market rises indefinitely. Given how the Sydney markets moved in the past - its likely to cool (at some point) and stabilise/dont move for a period.

Cheers,
Redom
 
Cheers for the replies gents.

As I figured not enough saved.

By August there should be $30k+ saved so will revisit.

I remember pre gfc how easy it was to get a loan. Was approved for a $380k new build with st George.

Then Lehmann bros happened and st george pulled the product overnight. Probably a good thing given our family financial issues.

That same house is now going for $520k though.

Shooting myself!
 
do you have family or a good friend that has property that might be willing to offer an equity guarantee ?

ta
rolf

I almost can't believe you wrote that.

Looks like the OP will have a much better deposit in August which really isn't that far away - a mere 6mths.

Involving others (be it family or friends) increases stress, risks and issues. I'm not a broker but risking other people's equity when it's not necessary is a bad idea in my opinion.
 
do you have family or a good friend that has property that might be willing to offer an equity guarantee ?

ta
rolf

This may be a possibility rolf.

How much equity would they have to forego on a purchase of $450k brand new considering I'm entitlted to FHOG of $15k in NSW on a new build and a stamp duty concession?

How do I then repay the person? Have you seen these arrangements work in the real world between 'mates' ? Family is not really an option at the moment.

Accountant's aren't supposed to ask for these sorts of deals. We're all loaded apparently.

Appreciate the posts again gents.

Cheers,

Bern
 
With the stamp duty concessions the purchase costs would be less than $2000 (a few fees and conveyancing).

An equity guarantee needs to cover 20% of the property value, so on a $450k property this is $90,000.

Take away the FHOG of $15,000 and your friend would need to commit $75,000.


Most lender require the guarantor to be an immediate family member, usually parents. There are one or two lenders that are more flexible on this and can take almost anyone.
 
I almost can't believe you wrote that.

Looks like the OP will have a much better deposit in August which really isn't that far away - a mere 6mths.

Involving others (be it family or friends) increases stress, risks and issues. I'm not a broker but risking other people's equity when it's not necessary is a bad idea in my opinion.


I dont disagree with your idealogy in principle, im not a fan of equity guarantees at all, just like I am not of lo doc loans.

This doesnt mean that where such things are an appropriate solution they should be banished from being offered, until such time that interpretation of lending legislation goes already further into the "moral hazard ether".

Each scenario has its pros and its cons, there are many outcomes where we wont write a guarantee proposition even though its viable structurally and financially, because the deemed risk to the guarantor is not warranted


ta
rolf
 
Build your savings until you have circa 10% deposit saved
Just a side question. Say someone saves up the 10% while banking with bank A then closes all accounts with them and moves to bank B (as a result of which has no access to the electronic statements provided by A), then how does one prove genuine monthly savings ?
 
Just a side question. Say someone saves up the 10% while banking with bank A then closes all accounts with them and moves to bank B (as a result of which has no access to the electronic statements provided by A), then how does one prove genuine monthly savings ?

by showing previous statements from bank a , and both side of the move transaction

ta
rolf
 
With the stamp duty concessions the purchase costs would be less than $2000 (a few fees and conveyancing).

An equity guarantee needs to cover 20% of the property value, so on a $450k property this is $90,000.

Take away the FHOG of $15,000 and your friend would need to commit $75,000.


Most lender require the guarantor to be an immediate family member, usually parents. There are one or two lenders that are more flexible on this and can take almost anyone.

So say I convince family / friend to do the equity deal.

How does it work in the real world?

I get the $75K for the deposit from them by them putting a charge of $75k over their property.

I have circa $15K in funds lying around which I would have used as a deposit.

Do I pay this off the loan or to them direct?

I would imagine I would pay this on the loan to reduce interest, then do a revaluation after 12 months / 2 years hoping property has increased and reduce my 20% margin? Any excess funds gathered would ideally go against the loan?

Love to see how this plays out in commercial terms, ideally with removing the equity charge on someone's property as promptly as possible.

Cheers gents.
 
If you've got $15k of your own money, then the $75k could become a guarantee of $60k. The more you can put into the deal, the less your friend needs to guarantee.

In practice you take an 80% loan ($360k) against the property you're purchasing. This loan is only secured by that property and you're the only party to that loan.

You then take a loan for the balance required to settle against your friends property. You'll be the borrower and your friend will give a security guarantee, which means they're willing to risk their house. You're still the owner of this loan, you make the payments, but your friend will be in the back seat along for the ride.

Your friend is potentially liable for the $60k in the event that the loan is called, but they'll only come after your friend in the event that they can't recover it from you first. Your friend will be limited to risking only the $60k, not the 80% loan.

The above structure of two loans tends to work well, because you can focus on paying off the $60k, then it's easy to get your friend out of the deal without going through a serious restructuring process. Guarantees like this aren't ideal, but it can work quite well for some people.
 
Thanks mate, appreciate the post.

You've seen this work quite well in the real world I imagine?

Something I am now seriously considering.

How open are banks to 'friends' or must it be immediate family?

Cheers,

Bern
 
Most lenders want immediate family, as in your parents (no uncles, siblings, or cousins).

ANZ will usually take almost anyone. If you suck up to me enough I might even to it (but probably not). ;)

It is a fairly big deal to do this for someone, they're putting their house on the line for you. They need to really, really trust you.
 
Most lenders want immediate family, as in your parents (no uncles, siblings, or cousins).

ANZ will usually take almost anyone. If you suck up to me enough I might even to it (but probably not). ;)

It is a fairly big deal to do this for someone, they're putting their house on the line for you. They need to really, really trust you.

Happy to be corrected, but I believe ANZ are the only one that allow it. Must be quite the friend to be willing to do it though! :)

Cheers,
Redom
 
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