The banks are making it easier for first home buyers to qualify for a mortgage of up to 95% of the property value.

Despite this, younger home buyers still face many hurdles when trying to get approval. This is generally because they don’t have the savings or financial stability that older borrowers have, and as a result, the banks doubt their ability to repay their mortgage.

Although, the fact that they have little savings, is no indication of their lack of financial commitment. In most cases they haven’t been able to save because they have been paying rent.

Luckily, there are some lenders that will accept a rental payment history in lieu of savings.

What is the qualifying criteria?

• You must have a rental history of at least three months (previously 12 months).
• Your rental repayments should be at least 50% of the proposed home loan repayments.
• You must be paying your rent and your bills on time.
• You must be renting via a licensed real estate agent.
• You still need 5% as a deposit, it just doesn’t need to be saved over a three month period. It can come from a gift, inheritance, cash, shares, bonus from work, term deposit or equity in another property.

The lease should be in your name alone or both you and your partner. You may still qualify if you are renting with other people, as long as you can prove a track record of prompt rent repayment via your bank account statements and your name is listed on the tenancy agreement.

If you meet the above criteria then we may be able to get your loan approved using rent instead of genuine savings!

Exclusions

In some cases your 5% deposit will still need to be held in your account for at least three months even though you have a three month rental history.

If your deposit comes from the sale of an asset such as a car then you will need to hold the funds for three months to qualify with this lender. Note that some other lenders can still consider this deposit source if you have been renting for longer than three months.

Your first home owners grant will not be considered as part of your 5% deposit by this lender. You cannot borrow a deposit from someone else or obtain a personal loan to use as a deposit.

Your loan will have to meet more stringent lending criteria as Lenders Mortgage Insurance (LMI) approval may be required. This means that your credit history will need to be clear of defaults, your employment must be stable and you must not have significant amounts of unsecured debt such as credit cards and personal loans.

Do you qualify?

Genuine savings is one of the most complicated areas of lending policy with many hidden catches and grey areas. Please use our genuine savings calculator to find out how the banks will assess your deposit and if you will qualify for a home loan.

Please read our page for more information about mortgages that do not require any proof of genuine savings.

If you need our help to get your loan approved then please call us on 1300 889 743 or enquire online and one of our mortgage brokers can determine which lenders you will qualify with.

A major mortgage insurer, Genworth, have recently suggested a mandatory mortgage fact sheet for home buyers.

This is a great idea for borrowers to be educated about LMI (Lenders Mortgage Insurance) as many do not know what it is or if it would apply to their loan.  It does not protect them as a borrower, yet many borrowers believe that it does.

The key to this fact sheet is that it must be kept simple as the usage of LMI varies between different lenders and insurers, it should inform customers without confusing them.

One thing the fact sheet could mention is that some lenders have significantly cheaper LMI than others, however this fact is unlikely to be supported by the banks.

To many LMI is seen to be an unnecessary cost, but for those Australians who find it difficult to save enough for a deposit LMI can help them having a chance to taking ownership of a home.

A general rule is that LMI is applied to loans above 80% of the property value with a normal home loan, and above 60% of the property value with a low doc loan.

You can learn more on our Lenders Mortgage Insurance page or get an LMI quote using our calculator.

Below is the article from Australian Broker News.

“Mortgage insurer Genworth said a new mandatory one-page mortgage fact sheet for home buyers that will contain details on Lenders Mortgage Insurance will enable them to better compare “apples with apples”.

Announced on the weekend as part of the Federal Government’s bank competition reform package, the new fact LMI sheet will allow consumers to compare quotes side-by-side, including the difference in premiums and rebate schedules.

Treasury has advised against the introduction of a scheme to allow the transfer of LMI between lenders, citing the expense, the extreme complexity of administration, and the conclusion it would benefit only 1% of all borrowers.

Genworth said in a statement the mandatory fact sheet could be similar to the Government’s Key Fact Sheet for home loans, and could be handed out by lenders just prior to borrowers signing their home loan contract.

The insurer said it would benefit borrowers to be aware of the reason for lenders requiring LMI, how LMI reduces the interest rate borrowers with a smaller deposits have to pay, the frequent capitalisation of LMI into the loan, and the availability and structure of refunds.

“Genworth believes it is important that homebuyers know how Lenders Mortgage Insurance works and the benefits it offers, plus their potential rights in relation to existing refund schedules if they switch home loans,” Genworth CEO Ellie Comerford said.”

Source Australian Broker News 22/08/11

Genworth Financial, a leading provider of Lenders Mortgage Insurance both in Australia and abroad, has released their inaugural International Mortgage Trends Report. The report compares the mortgage industry and property market of Australia, Canada, India, Ireland, Italy, Mexico, the United Kingdom (UK) and the United States (US).

So how do home loans in Australia compare to those in the rest of the world?

Australia

• Almost half of all Australian home buyers surveyed make more than the minimum mortgage repayments,
• Strong house price growth provides an incentive for investors, but creates a barrier for First Home Buyers (FHBs),
• In order to own property, Australians are becoming increasingly indebted.

Canada

• Almost half of all Canadian respondents were positive about the outlook for the economy and housing market,
• Canadian respondents are generally comfortable with higher levels of debt,
• Government supports the availability of credit through its operation of the Canada Mortgage Bonds (CMB) program and other government backed securitisation vehicles.

India

• Indian home buyers are generally upbeat about the economy and their personal finances,
• However, there are some concerns about high house prices in Tier one cities after rapid growth in the last 18 to 24 months
• As a result, few are looking to buy property in these larger cities as they feel financially squeezed out, and demand may well shift to Tier two cities
• Moving forward, a combination of mortgage insurance and product innovation could help new home buyers get into the market sooner.

Ireland

• The Irish Government has introduced austerity measures for the next four years in order to control
  spiralling debt,
• Irish respondents had a generally negative perspective on the economy and their personal finances, with government measures a clear factor,
• FHBs are making up an increased share of the mortgage market, following improved affordability.

Italy

• Home buyer confidence in Italy remains weak, as 55% of Italians surveyed felt negative about their national economy and 46% said they were concerned about their personal financial situation,
• Housing affordability has improved in the last year due to lower house prices and interest rates,
• However, two thirds of those surveyed who would ideally like to buy property now are not in the financial position to do so.

Mexico

• Mexicans who took part in the survey are relatively positive about the economy and their personal finances,
• Those who are struggling are worried about unemployment/underemployment, which is impacting on property market participation,
• Housing shortages have resulted in a fall in affordability, with the average age of a FHB over the last decade rising to 33 years,
• Very few Mexican respondents have had trouble meeting mortgage repayments, but their outlook is pessimistic.

UK

• UK home buyers interviewed are pessimistic over the economy and their personal financial situation,
• Despite being more optimistic than average in regards to the property market, UK respondents will not actively enter the market in the next 12 months,
• FHB respondents in the UK are increasingly being priced out of the market,
• Eight in ten UK respondents expected no difficulty meeting their repayments over the coming year.

USA

• More than half of Americans surveyed are nervous about how the economy will perform in the coming year,
• Nearly two in three feel that now is a good time to buy a home,
• Two thirds of American respondents feel that mortgage insurance helps them buy a home with a smaller down payment, and sooner,
• The average age at which a borrower is able to purchase their first home has increased from 27.3 years during the 1970s to 31.6 years in the 2000s.

As you can see there is a common trend of first home buyers becoming older across the world, and affordability becoming a major issue in countries that were largely unaffected by the GFC. There are other common trends of regulation restricting access to mortgages for many borrowers, which in some countries is necessary whereas in other countries may further decrease the ability of First Home Buyers to enter the property market.

You can read the report in its entirety on Genworth Financials website.

Source: Genworth Financial – International Mortgage Trends Report.