They say your home is the biggest investment you’ll ever make. At the core of that investment, though, is your home loan. What seems like a simple concept at first—a financial loan granted for buying property—can actually be much more complicated.
It’s common to hear experts in finance and real estate alike offering their mortgage advice to first-time home buyers—and anyone who will listen, which can lead to experts pitching in with conflicting takes and a lot of confusion for uncertain prospective buyers!
To help you cut through the noise, we’ve compiled 4 quick and simple pieces of advice to give you a running start in your home ownership journey:
1. Don’t make any major purchases or change jobs during the mortgage process
As any sudden or significant financial changes can potentially affect your home loan application, this step is absolutely crucial to remember. Even if a buyer has passed the inspection period, secured pre-approval and is awaiting settlement, a difference in cash flow of as little as $1,000 a year has the potential to delay, set back or even cancel your loan approval from a lender.
What may seem like a small change at the time has the potential to force a borrower to start the entire home loan process all over again. If in doubt, keep track of all statements, all receipts, all pay slips, and if needed, reach out to a financial advisor to assist you in making sure your finances are watertight before starting the home loan process.
2. If you have less-than-perfect finances, find a reputable mortgage broker or lender, rather than a bank
Any major banks will usually only offer conventional home loans, while non-bank lenders and mortgage brokers have access to a variety of home loan products for people with all kinds of financial histories.
Depending on a lender’s credit policy, eligibility criteria and loan terms and conditions, a good mortgage lender will get creative and work hard to secure that home loan for you as a potential buyer. With a range of options for lending, tools and resources and a widening home loan market, it always pays to shop around and find the loan – and lender – that works best for you.
3. Don’t start house-hunting without a home loan pre-approval in place
One of the first things any real estate or property agent will ask a potential buyer is if they already have their home loan pre-qualification letter in hand. If they do, it’s a greenlight to start house hunting.
The biggest reason many home buyers choose to apply for home loan pre-approval is because it strongly indicates you’ve fulfilled a lender’s borrowing requirements and are more likely to be successfully approved for a new home loan when you apply. This can speed up the process significantly!
If a potential buyer doesn’t have a pre-approval letter, chances are they might not be prepared to purchase a home and meet home loan repayments as required.
4. Resist the urge to take a break
Like any application, the process of getting your home loan approved can be an exercise in patience. Unfortunately, there is no definite answer on just how long you can expect to wait, because the success of any application will depend on external factors. Australian home loan lenders typically will assess potential clients on a case-by-case basis.
The loan application process is complex, and people often feel overwhelmed while gathering all the documents, identification, financial statements and credit or rental history required to make a successful application. It can often feel tempting to give it a rest for a few days.
Throughout the mortgage and property buyer process, there are critical dates on purchase contracts that must be met at every stage, so the agent needs to work closely with the buyer to keep things moving and make sure their mortgage broker or banker is getting all the information they need, in order to process the home loan application through to settlement.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.