Dear %%First Name%%
much can I borrow?
topic is probably one of the first things many people think of when considering
buying their first home and understandably so. Without knowing how much you
can borrow it is difficult to know where you can afford to buy and therefore
difficult to plan ahead.
There are several key factors which will impact
on the amount any bank or lender will feel comfortable in lending to you.
Some of the variables a bank will look at include, first and foremost, your
income and security of your employment. For example, some of the questions
they will ask you will include what your weekly wage is and how long you
have been in your current job.
Next a lender will look at your outgoings or expenses. They will want
to know about any loans you may have or any credit card or store cards. And
here is a tip... when looking at credit and store cards, it is not the
balance you owe that will impact on your borrowing capacity, but the actual
limit you have available. This is logical when you think about it because
at any point in the future after they lend you the money to buy your home,
you could then max out your credit cards and this could affect your capacity
to make your new loan repayments to them!
Some of the other factors affecting your borrowing power are your credit history
or CRA report (have you ever defaulted on a loan or mobile phone account
for instance), the number and age of the children or dependants you have,
the type or size of the property you are looking at buying and your deposit
This may seem like a lot to take in, but effectively what the lender is looking
at is aimed at estimating what they call your uncommitted monthly income or
UMI... the greater the UMI the larger the borrowing capacity... so
the higher your income and lower your debts the more you can borrow.
To work out your UMI each lender has their own servicing calculator. As
mortgage brokers, we are trained on each lenders criteria and can match your
needs with the lenders accordingly. We are also able to provide you with
a good idea of how much you can borrow and can discuss the factors affecting
this constructively and effectively.
Set your borrowing limits
Knowing how much you can borrow is important, but of even greater importance
is ensuring you can afford the repayments. Be careful not to overextend
yourself because you think you have found your ideal dream home. That
is a sure way to turn your dream into a nightmare!
Hopefully this has been a useful insight into funding your first home. Our
next installment in this first home buyers "getting started" email
course will look at the costs involved in the purchase. As always if
you have any questions please let us know.
Until next time...