Bank 5 percent genuine savings Vs Govt Grants

| May 16, 2009

Taking advantage of the current market is difficult for first home buyers without substantial savings. Lenders are tightening approval criteria, such as needing evidence of at least 3 to 5 per cent genuine savings, excluding the First Home Owner Grant and other incentives offered by State Governments.

In a blow to the housing market, most major banks have tightened lending criteria for borrowers requiring loans of more than 80pc of their property value, according to financial analysts.

The decision will make it far harder for first-home buyers to obtain a loan despite the doubling of the first-home buyers’ grant to $14,000 and $21,000 for new homes.

EVil bank

Goverment grants

With interest rates at its lowest in decades, home buyers should be rejoicing. However, grim reality sets in as home loan applicants are knocked back harder than ever by the banks.

St George will officially remove their no deposit home loan product as of 9th April 2009. This means they will no longer offer 100% home loans to its consumers.

We will also see lenders reducing the amount they will lend against a property. Commonwealth Bank announced this week that they will only lend up to 90% of the properties value for new customers. This follows ANZ, ING and Citibank reducing their lending up to 90% of the properties value.

These policy changes that will make it difficult for home buyers to enter the market.

Many banks now require 3 percent genuine savings over 3 months to satisfy LMI, meaning that home loan applicants must prove that they have saved a 3 percent deposit for a minimum of 3 months. In other words, they must have kept the money in the account for 3 months. ING Direct requires 5 percent

The next major shift will require applicants to have at least 3 to 5 percent in genuine savings for a minimum of 3 months. This can be in the form of cash in a deposit account, shares or equity in another property to be considered for a loan.

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Category: Banks, finance, home loans, investment property, loan to value ratrio, LVR

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