Are you buying a new home in Australia?

Wherever you live, buying a new home is a massive step and it’s important to do it right. It’s the next chapter of your life and a large commitment, you want to make sure you get off to a good start. But when it comes to getting the best home loan, it can be a daunting, tricky process.

Don’t worry, we’re here to help! Read on for these 7 tips to get the best loan for a home in Australia today.

1. Know Your Budget

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A key factor for success in finding the best mortgage in Australia is knowing what you can afford. Lenders could approve a loan that takes you to the very end of what you can afford.

In this situation, you’d have no wiggle room if any unexpected costs come up. It’ll leave you in a bad financial situation if the worst happens, and you could end up defaulting.

Lenders preapprove based on your gross income, revolving debt, and outstanding loans. They don’t consider other monthly bills like insurance, utilities, childcare, etc.

You need to factor in all your monthly expenditures when working out what you can attribute to a home loan. Look at your net monthly income after tax, minus all your expenditures. This will let you see how much money you have leftover to dedicate to a mortgage.

Don’t exceed that amount, and try to get a lower mortgage. The more wiggle room you leave yourself, the more security you have if unexpected bills arise. Once you know the amount you’re comfortable with, you can look for lenders who meet that.

2. Sort Out Your Credit Score

Another tip for getting home loans in Australia is to get your credit score sorted. Not everyone will qualify to buy a house, you need to meet income and credit requirements.

If you need to take out a loan when buying a new home, the bank needs to know you’ll pay it back as agreed. A low credit score marks you as a lending risk. If your score is below 540, you’ll usually struggle to qualify. If you do qualify, you face higher interest rates on any loan.

The higher your credit score and the more you prove you pay your debts on time, the better your position is. It’ll give you the power to negotiate for better interests and terms with lenders.

To raise your credit score, check your report is accurate. If there are any errors, they could harm your score so you need to fix them. You can check your credit score for free with credit bureaus like Experian. You get one free report every 12 months.

3. Research the Lending Climate

Understanding the current lending climate and who the major lenders are is a huge bonus. To start with, here are the most common types of lenders for Australian Home Loans.

Credit Unions

These financial institutions are member-owned and have good interest rates for shareholders. Most are easing up membership requirements, so it’s getting easier to find one to join.

Mortgage Bankers/Brokers

These work for specific banks or financial institutes and package loans. These are then considered by the bank’s underwriters as viable or not. If you pick a broker, you want to go with an award winning mortgage broker.

Correspondent Lenders

These are often local mortgage companies that have the resources to provide the loan. But, they use a pipeline of other lenders, and they sell your loan to them right away.

Check that each lender you look at has the right licenses and qualifications. Research them in full, and read the views of past and current customers to see what it’s like to deal with them. You need to find the right company that fits your home buying goals.

4. Ask Family & Friends for Recommendations

Sometimes the easiest way to find the best mortgage lender is to ask friends and family. Ask about who they used, what their terms were, how the service was, and what they think of the lender.

If you’re in a similar financial situation, you could use this information to get a similar deal. But finding someone willing to work with you and listen to you is vital.

In a competitive market, a relationship of cooperation with a lender could give you the edge. It could be what closes the deal on the perfect house for you faster than other buyers.

5. Compare Mortgage Lender Quotes

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Start by searching for the best home loan rates in Australia online. But, beware, these quotes you’ll see online are rough estimates. You’ll need to apply and the lender will need to pull your credit info to get a solid quote.

When you have received a few quotes, compare them and what you get. You should pick the one that makes the most financial sense for your situation. The more knowledgeable and clued in you are, the more power you have. You could use this knowledge to negotiate for better rates.

You shouldn’t go straight for the lowest rate because it’ll cost you the least. You need to make sure the lender is trustworthy and easy to deal with. The interest you’ll pay over the length of your loan isn’t small. Low-interest rates could save you thousands in the long run.

6. Get Preapproval

When buying a home in Australia, you need to put yourself at an advantage. A preapproval letter from your lender will give you an edge over other buyers.

It proves to sellers you’re serious about buying, and have a loan that’ll likely come through. It also shows your finances are in order, you know what you can borrow, and know the home is within your budget.

A preapproval could also save you time. When you put in your offer, the lender already has your information. It’ll make processing your home loan quicker. Get preapproved by more than one provider so you have the choices available.

7. Read the Small Print

No one likes to read the small print, it’s all jargon that makes our eyes cross. But when you’re getting a home loan in Australia, you must read it all and understand it.

If you don’t you might miss important details, or get some nasty surprises, so don’t be afraid to ask your lender questions. Look for things like:

  • interest rate
  • lender & loan processing fees
  • monthly payment amount
  • closing costs & responsibilities

They should stay close to your preapproval figures. Some lenders will offer credits to reduce the amount of cash due when closing. But credits can push up interest rates, meaning you’ll pay more long-term. Your solicitor should be able to help you and read through it with you.

Getting a Loan For a Home in Australia Made Easy

Who is a private mortgage lender

So, there you have it! Now you know these 7 tips for getting a loan for a home, you’ll be sure to get the right one for you.

The more prepared you are the better. Get your finances together, and make sure you have a high enough credit score. Shop around, and ask those close to you for recommendations. Knowledge is power, so give yourself the information you need to get the right mortgage for yourself.

If you found this article useful, check out our other blog posts for more!

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