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How Much Can You Afford To Borrow To Buy Real Estate In Western Australia?
September 9, 2010 by man
Filed under First Time Home Buyer Michigan
Many home buyers don’t realise how much they can afford to borrow, along with other basic lending details, until they actually apply for a loan. This situation is not ideal because an informed home buyer is always in a much better position to make an offer on a property.
Up until about ten years ago it was pretty much the case that the ‘rule of thumb’ for buying a home was that you could borrow about three times your gross household income. So, if a couple was making $110,000 between them each year, a bank might loan up to $330,000.
This rule of thumb doesn’t apply terribly well today with house prices having grown so much. In January this year, the median purchase price for first home buyer in Western Australia was $400,000.
Of course, the price will vary depending on the suburb you are interested in. For example, in 2010, the median purchase price in the popular suburb of Subiaco was $1.3 million while in Kardinya is was $600,000. You can research other Western Australian real estate prices at the REIWA web site.
One way to a smooth start with a home loan is to have a healthy deposit. If you don’t have a ready deposit, it’s wise to start a regular savings program in preparation of home ownership. Most lenders require recent evidence of savings before approving a loan.
It’s not always a good idea to put all your savings into the purchase of a new home. To cover unexpected costs, it’s wise to have a cash reserve of at least two months mortgage repayments.
Talk to your financial institution about the deposit. Most lenders prefer a deposit of 10 per cent the purchase price, but this is becoming more and more unrealistic. Deposits of 5 per cent are now common.
Ask your lender to outline, in detail, all the fees that apply to the loan. Remember to including mortgage costs, mortgage insurance, stamp duty or any other fees that may apply. These costs are added to your home loan. Rather than looking at how much the bank will allow you to borrow, it makes more sense to concentrate on how much you can comfortably afford.
For more information about home affordability and applying for a home loan, please visit www.reiwa.com.au
