What have you always wanted to ask a mortgage broker? Check out a broker’s answers to five of the most pressing questions from homebuyers.
Kathy answered five of the most pressing questions about getting a mortgage application over the line.
What’s the difference between a mortgage broker and a bank?
Kathy has been a mortgage broker for many years and is now Director of her own business, Ink Wealth.
She explains, “When you walk into a bank, you’re basically walking into that bank’s policy. What a lot of people don’t understand is the policy between each lender is incredibly diverse. At one bank, you can get a home loan with just one paycheque, while at the next bank, you need three months. In other words, that bank might not have a policy that suits your financial circumstances. So they might decline your loan.”
Brokers, on the other hand, offer a wide selection of lenders to choose from, “We’ve generally got between 20 to 30 different lenders on our panel,” says Kathy, “We know all the different policies and we actually research each client and we would know that that client was not going to get a yes from a particular lender.”
How soon should you approach a mortgage broker when you want to buy a house?
Kathy says it’s smart to head to your broker early on.
“Brokers do a preliminary assessment where we just basically do an interview, follow up with some fact-finding checks and ask about pay, personal savings etc. That lets us know what you’re searching for and what we want to go with. Then we drill down further and decide on what bank we want to work with. The next step is to put an application into that bank for loan pre-approval. Generally, that pre-approval lasts between three and six months so that gives you confidence when you’re looking.”
Having pre-approval is a huge help in the whole home buying process, “It also gives the real estate agent confidence,” Kathy says, “Often they will ask ‘Do you have your pre-approval in place?’ Especially if you’re going to an auction, you absolutely have to have that pre-approval before you bid.”
When do you start looking at types of loans and interest rates?
“You and your mortgage broker actually decide what type of loan to apply for before the pre-approval,” Kathy says.
“When we gather documents and we do the preliminary assessment, we send the client the preliminary assessments and show the three lenders we have drilled down to and what they can offer.”
“During their second appointment with me, I explain my clients’ loan options in more detail, and I go through the different rates. After they’ve got a little snapshot, they might discuss it with their partner or maybe their parents. After that, we drill down further into what would work, for example if you have a preference relating to any of the banks. And that’s how we make the decisions.”
What information should you bring to your mortgage broker?
To start the loan application process, you generally need, “Two payslips and a group certificate/tax summary, and then you need a 30-day transaction statement of your main living expenses. That’s a snapshot of your main living expenses for the bank. Then you also need a snapshot, a 30-day transaction of where your wage goes into,” says Kathy.
“If you’ve got any credit cards or existing debts that aren’t listed on your credit file, we wouldn’t need the last one to three months’ statements. We would need ID; a driver’s license and passport. If you’re self-employed, it’s a little bit more; we need two years’ tax returns and financials for every entity that you own, including your personal tax returns.”
What happens if the purchase price doesn’t match the bank’s valuation of the property?
Your bank will lend you the money if they think the property is worth the price you want to pay.
Kathy says that a clash in valuation can be a real difficulty, “To argue evaluations is practically impossible. It’s like banging your head against a brick wall. You have to provide evidence to the valuer. You’ve got to write three comparables to them that they haven’t come up with, and then they have to agree with you. It’s like you’re saying that they’re lying; they will rarely ever change.”
If you’re having this issue, “What you do is you go to another bank, and you get another value around it. You might try three values, and if it’s consistently coming in low, you know you’ve paid too much.”
The good news is it rarely ever happens, “It’s only when the valuer really believes that you have paid too much for a property. I think I’ve only ever had a valuation turned over once in my whole time as a broker.”
The value of using a mortgage broker, other than getting the best loan, is having a professional to help you prepare your application and guide you through the process. Reach out to Kathy via Ink Wealth if you need support to buy a house or apartment this year.
Thorpe Conveyancing provides reliable, cost-effective conveyancing to home buyers and sellers in Sydney and beyond. Get a quote for our services today.