Q: What are the Requirements to Be Eligible for a Low Deposit Home Loan in Australia?
- Genuine savings
To be eligible for a low deposit home loan in Australia, you’ll need to demonstrate genuine savings. Genuine savings refer to funds that you’ve accumulated over time through regular savings patterns, such as savings from your income or investments. Lenders require genuine savings to assess your ability to manage money and repay the loan.
- Stable income and employment
Lenders want to ensure that you have a stable income and employment history to support your loan repayment. Generally, lenders require that you have been employed for at least six months and have a stable income. If you’re self-employed, you’ll need to provide tax returns and financial statements to demonstrate your income.
- Good credit score
Your credit score is a significant factor in determining your eligibility for a low deposit home loan in Australia. Lenders use your credit score to assess your creditworthiness and ability to repay the loan. If you have a poor credit score, you may still be eligible for a low deposit home loan, but you may be required to pay a higher interest rate.
- Lenders Mortgage Insurance (LMI)
If you borrow more than 80% of the property’s value, you’ll be required to pay Lenders Mortgage Insurance (LMI). LMI is an insurance premium that protects the lender in case you default on the loan. LMI can add thousands of dollars to the cost of your home loan, so it’s important to factor this into your budget when considering a low deposit home loan.
- Property type and location
The type and location of the property you’re purchasing can also affect your eligibility for a low deposit home loan in Australia. Some lenders may have restrictions on the type of property they’ll lend on, such as apartments or townhouses. Additionally, some lenders may have restrictions on the location of the property, such as rural areas or high-risk locations.