If you are a first time home buyer and you are asking, ” How much can I borrow for a home loan to buy my first home? ” or even have Googled “ how much can I borrow mortgage? ” at some point then you have come to the right place! If terms like “borrowing power” and “credit score” make you feel a little overwhelmed, we get it.
The ins and outs of buying a home or getting a home loan can be complex and we know you can feel a little lost if you are researching by yourself. That’s exactly why we’ve put together this blog – to make sure getting your head around borrowing for your first home doesn’t feel like a massive hurdle.
Read on to learn what borrowing power is, along with some other first home buyer basics.
How Much Can I Borrow ?
As new home loan commitments rise again this year, first-time home buyers are seeing a lot of competition in the housing market. Understanding your borrowing power is crucial so you can make confident offers and secure a property.
The good news is knowing “ how much can I borrow for a home loan? ” doesn’t have to be complicated.
What Determines Borrowing Power?
Lenders use a number of factors to determine how much money they will lend you for a home loan.
These factors include:
- Income: All income of loan applicants is factored into the final calculation.
- Expenses: These include household living costs, debts (including credit cards and student loans) and any other financial commitments. The lower your expenses, the higher your potential borrowing power.
- Savings: A healthy deposit saved in a bank account shows you’re responsible with money and reduces the amount you need to borrow.
- Credit history: A good or excellent credit score shows lenders you can manage debt responsibly.
Lending and financial institutions will take into consideration these variables and gauge if you have the capacity to repay your home loan.
Calculate Your How Much Can I Borrow Mortgage Amount With A Borrowing Power Calculator
The answer to your query behind Googling “ How much can I borrow home loan? ” is not a question with just one answer. Lenders calculate borrowing capacity by evaluating various factors and how much they will lend to you personally depends on your own financial situation at the time of the application submission.
A debt-to-income ratio is the percentage of your monthly gross income and a crucial factor in how much you can borrow for a home loan. This part of your income is the one you use to pay your debts and is used by lenders as a determining factor to calculate your borrowing risk. If you have a low DTI ratio, then your debt and income are balanced well.
A great place to start to give you an idea of your borrowing power is with the help of an online calculator. These calculators typically ask for your income, expenses and desired loan term. Based on this info, they provide an estimated borrowing limit. You can also use our online calculator to check how much you can borrow.
If you want a more thorough explanation, you can rely on us here at Professional Lending Solutions to learn more about mortgages as well as help you from start to finish of getting a home loan approved.
Home Loan Basics
- Saving up: Aim for a 20% deposit, and if you have less, Lenders Mortgage Insurance is available.
- First Home Buyer Grant: People buying their first home in Queensland can access a government grant.
- Extra costs: Some extra costs that can’t be rolled into your loan can include stamp duty, legal and conveyancing fees and building and pest inspections. You’ll also have council rates, utilities and home insurance costs as part of your ongoing home ownership costs.
- Loan options: Many different loan types are available including fixed or variable interest rate loans and different loan features (like offset accounts).
- Pre-approval: Lender pre-approval shows sellers you’re a serious contender and streamlines the offer process.
- Getting help: A mortgage broker can help you compare lenders and find the right loan deal for your situation.
Increasing Your Borrowing Power
- Increase your income: You could look at negotiating your current salary, find a higher-paying job or even get a second job.
- Clear your debts: Pay off your existing debts before you apply for a loan; this will show that you are capable of paying off your debts and be eligible to borrow a more significant amount.
- Lessen your expenses: Recheck your budget and cut it in such a way that you are still retaining your most fundamental needs while also reducing your monthly costs.
- Shop and compare different lenders: Different lenders offer different loan amounts and conditions. Exploring multiple lenders and comparing their offers allows you to have a better understanding of what you’re entering into.
Get a Personalised Borrowing Estimate with Professional Lending Solutions
Things like how much we earn and how good we are at paying off our bills all play a part in how much the banks will lend us for our first home loan. But it’s not always as simple as just plugging some numbers into a calculator; everyone’s different! To really know what you can borrow, it’s best to have a proper chat with a lending expert who can give you a personalised assessment.
Contact Professional Lending Solutions today for a consultation with one of our expert mortgage brokers! We’ll help you determine your borrowing capacity accurately and find the right loan options to suit your needs.
Phil’s journey from banking to mortgage brokering reflects a career driven by a commitment to personalised service and tailored financial solutions. With a distinguished background in banking, including roles at NAB, ANZ and Lloyds TSB Bank in the UK, Phil spent 12 years developing expertise in personal and commercial finance, while also completing a Bachelor of Business (Finance), followed by an MBA majoring in International Business.