5 Questions You Will Ask About Buying Property

By Effie Nicol, YBR Home Loans Earlwood & Marickville 

James and Lisa are a beautiful young couple who recently came to me for urgent assistance to help them finance their first home. They had been self employed for the past 18 months, after recently launching a small business. They had approached their bank for a loan, but were turned away because the bank’s lending policy required them to be self employed for at least 24 months. Feeling disheartened, James and Lisa thought they were going to struggle to get financing.

Immediately, I reviewed a number of lender policies and with a thorough understanding of their criteria and offerings, found a suitable solution for James and Lisa’s circumstances of being self employed. I also reviewed the First Home Buyer Benefits that they may be eligible for.

Despite the initial setback, we were able to present four suitable loan options that helped them obtain approval by meeting another bank’s self employed policy, which accepted 18 months of history instead of the two years required by other lenders. Additionally, I guided them to speak with their conveyancer in relation to the First Home Buyers Stamp duty reduction which also saved them thousands in up front costs. James and Lisa felt ecstatic and valued, securing their dream property in a timely manner without the six month wait they initially feared.

It’s a common problem, particularly for first-time buyers.

Buying a home or refinancing your mortgage is a big step, and it can feel overwhelming at times. Whether you’re a first-time homebuyer, an experienced real estate investor, or someone looking to refinance, having a knowledgeable broker can make all the difference when lenders try to make you jump through hoops. 

Here are five essential questions all borrowers need answered when you set out to purchase property:

1. How Much Can I Afford?

Determining how much you can afford is crucial to avoid financial strain. It’s the number one question on any borrower’s mind and typically the very first question we’re asked as brokers. So here are the things we will evaluate at the outset with you to determine your borrowing capacity:

• Income and Debt Obligations: a broker starts by reviewing your income and assessing your debt obligations to get a clear picture of your financial standing.
• The down payment: next we determine the amount you can put down as a deposit.
• Upfront/Settlement Costs: we walk you through some typical costs involved in the process, such as stamp duty, legal and conveyancing fees, and loan establishment fees.
• Pre-Approval Amount: After evaluating the above factors, we recommend any borrower to seek pre-approval with a lender. Why? Because it gives you a clear idea of how much you can borrow and can provide you with the confidence to make an offer or bid at an auction, knowing that you have the financial backing.

2. What Are My Financing Options?

Understanding the different types of loans available can help you choose the best one for your situation. Every borrower has different needs and has different circumstances in life, but the crucial role we play as expert brokers is to match your needs and circumstances with the right lender and product. From fixed or variable rate home loans, to construction loans, guarantor loans, self employed or low-doc loans, there’s an array of solutions out there.

Your broker can provide insights on:

• Home Guarantee Loans: Great for homebuyers with lower deposit requirements, especially first-time homeowners.
• Australian Defence Loans: Exclusive to veterans and military personnel, often with no deposit required.

3. What Is the Current Market Like?

The real estate market can fluctuate, and understanding its current state can influence your buying or refinancing decisions. Your broker can provide insight on:

• Interest Rates and Trends: Information on current mortgage interest rates and trends over recent years.
• Property Values: Insight into local property values and appreciation rates, as well as providing in depth suburb and/or property reports as part of their service to you at no extra cost.

4. What Are the Costs Involved in Buying?

Getting a clear picture of the costs involved can help you budget effectively. Your broker can break down the following costs associated with a property purchase:

• Deposit
• Stamp Duty
• Legal and Conveyancing Fees
• Loan Establishment Fees
• Lenders Mortgage Insurance (if applicable)
• Title Search and Registration Fees
• Moving Costs  
• Your broker typically provides a ‘funding sheet’ at the outset, outlining these costs to give you a clear understanding of your financial commitments.

5. How Can I Improve My Mortgage Terms?

Refinancing to purchase a new home, or simply to improve your mortgage terms after a few years, can save you money in the long run. Here are some key tips about improving your mortgage terms:

• Pay your bills on time
• Keep your credit card balance low, relative to your credit card limits.
• Managing Credit Enquiries: I’ve seen some borrowers make four to five credit enquiries for a single credit application, not realising that each enquiry has a negative impact on their credit score. As a mortgage broker, our preliminary assessment of your credit situation is considered a “soft enquiry” which does not affect your credit score. It is only when we lodge a formal loan application through a lender, that a “hard enquiry” is performed. 
• Ongoing Management: A mortgage broker can manage your situation for years to come, with annual reviews to check your mortgage rates to ensure your rate remains competitive and that you’re getting the most out of your home loan.

A knowledgeable broker can provide the guidance you need and take a lot of the legwork out of your decision-making process. By taking these five questions to your experienced mortgage broker, you’ll be better equipped to make informed decisions and achieve your property goals.

Ready to take the next step? Contact a trusted broker today and get the answers you deserve.