Why does a first home buyer need a mortgage broker?
Getting a home loan as a first home buyer is a serious financial step in your life. For someone with minimal experience in the property market, making innocent blunders that can sink a perfect deal is quite common.
More often than not, new home buyers seek lenders considering only one factor: a competitive interest rate. This is where they go wrong.
The evolution of the Australian mortgage market has introduced several types of lenders:
- Major bank lenders
- Non-major bank lenders
- Specialist lenders
- Wholesale lenders
- Non-bank lenders
- Online lenders
The interest rates each type of lender provides is different. For example, lender banks offer cheaper interest rates than specialist lenders.
Of course, as a first home buyer, you would prefer the lower rates at lender banks. But, you must also question:
Would lender banks choose me?
Many lender banks have strict rules and policies they do not like bending.
They filter out applications that hint towards even the slightest chance of default.
If you are unable to match their requirements, your application gets rejected. This leaves a credit enquiry on your credit file that can hinder any significant financial activity in your future.
If you consult a mortgage broker, they either would work out a loophole or avoid sending your application to lenders, so that it doesn’t get rejected and end up on your credit report.
Setting aside interest rates, are the lender banks still preferable?
Unlike major banks, specialist lenders are extremely flexible with their home loans.
The flexibility is why their interest rates are set higher than lender banks. However, they also provide discounts and concessions in other areas, such as minimum deposit requirements and Lenders Mortgage Insurance (LMI) fees. All the discounts and concessions usually add up to a better deal than just paying a lower interest rate.
A mortgage broker will recommend you to a specialist broker when they know your case is too intricate for a standard home loan. They will find you the best specialist lender possible and get you a bargain interest rate as well.
Selecting a lender from several available choices is difficult for a first-time borrower. Further, choosing the lender that best suits your profile and gives the best deal is even more challenging. Thus, you need a mortgage broker to ensure you make the right choice.
Factors to consider for your first home loan
When lenders assess your loan application, they examine certain factors that help them decide whether you will repay the loan.
A mortgage broker checks all those factors with you beforehand so they can match you with a suitable lender. This also allows them to prepare for negotiating with the best lender available.
Below are some of the factors lenders assess while processing your application:
Credit history
Lenders require you to disclose your Equifax credit file during the application process.
If your credit file has defaults, bankruptcy, excessive spending, court writs or too many credit enquiries, your application gets rejected.
A mortgage broker can come up with logical explanations for bad entries in your credit file.
They can convince lenders you have changed your spending patterns. They may also ask you to cut down on your expenditures, cancel multiple credit cards, and consolidate your existing debts. This way, non-major lenders may overlook your bad credit.
Income source
Lenders require you to submit a copy of your payslips or income returns for the last two years.
If your job has changed in those two years and so has your income source, lenders will label your income unstable.
A mortgage broker can convince lenders to take a commonsense approach. They do so by providing reasons for your change in income and why it will be stable moving forward.
Serviceability
All lenders calculate the serviceability of a home loan by considering:
- Basic Income
- Expenditure
- Loan amount compared with your income
Most lenders usually factor in only 80% of your basic income. They also do not normally factor in bonus income and overtime income.
A mortgage broker can convince lenders to factor in up to 100% of your basic income.They can also get brokers to factor in any additional income you may have.
This way, your serviceability increases and you get offered better deals.
Employment status
Home loan packages and offers differ based on your employment status.
A self-employed first home buyer might get a better deal than one who is on maternity leave and vice versa.
Your mortgage broker is there to ensure you get the best interest rate and Loan-to-Value Ratio (LVR) available, plus any discounts possible, regardless of your employment status.
Your deposit source
A first home buyer is eligible for the first home loan deposit scheme (FHLDS).
The scheme allows you to deposit as little as 5% to get a home loan without paying Lenders Mortgage Insurance (LMI) fees.
There are thousands of applicants for the scheme, but only a few get selected.
Some mortgage brokers, like Home Loan Experts, assist you through the application process for the scheme.
This makes your chance of getting selected high, given the mortgage brokers will work their network to get your application through.
Schemes available for first-home buyers in 2021
Here are some other schemes made available only to first-home buyers:
Why choose Home Loan Experts as the mortgage broker for your first home loan?
- Our panel of lenders: We have a panel of 50+ lenders. It consists of the traditional banks (including the Big Four), non-bank, specialist, wholesale and online lenders.Our panel also includes most of the 27 lenders contracted for the FHLDS scheme.
- Our expert mortgage brokers: All our mortgage brokers are specialists in at least two niches.First-home buyers are a specialty for most of our mortgage brokers. We can connect you with the best brokers for this niche.
- Our customer relationship team: We handle all your enquiries on home loans.
- Our customer success team: We have a separate customer success team that follows up on your home loan, post-settlement. In case you are not satisfied with your home loan, our team helps you with alternative options and solutions.
- Our comprehensive website: Our website has over 300 articles relevant to home loans. We also review popular mortgage lenders in Australia, regardless of whether they are on our lender panel.We have all the resources you’ll need to decide on a loan for your first home.
Are you a first home buyer?
Our brokers can guide you through the process and get you the most competitive loan for your situation. Enquire online or call us on 1300 889 743!
Note: Be sure to check our first-home buyers guide if you want an overview of the journey to your first home.