Shopping for a home loan

Last Saturday saw us trudging our way to Aussie Mortgages’ Southland shop to talk to one of their advisers with the hope of going through the process of getting a loan pre-approval. Aussie Mortgages is a mortgage brokering service designed to help prospective home buyers find the best mortgage for their needs. Although they don’t offer home loan products from every financial institution in Australia, their panel of lenders include some of the biggest names in the industry. This means that they could easily compare product features and rates from various lenders and find several that may suit your needs. Compare this with the tediousness plus amount of time and effort required to understand each home loan product offered by different institutions on your own and you’ll see that there is merit in using a mortgage broker’s assistance. Best of all, Aussie’s service is free – they only get a commission if you sign up and they supposedly get the same commission regardless of which lender you choose.

We’ve been to the shop several weeks before when we attended their free First Home Buyers information session. In that seminar, the presenters explained how Aussie Mortgages could help us and discussed the things that a first home buyer would need to consider. They stressed the importance of having a healthy 10% deposit saved up, loan types, grants available to the first home buyer, researching the real property market and the other costs that comes with purchasing a home aside from the purchase price (stamp duties, loan mortgage insurance for people who have less than 20% deposit, inspection fees, rates, building insurance and legal costs). Attendees were also given show bags containing reading materials and quick start guides for prospective home buyers who don’t have any idea of where and how to start the process.

The past few weeks saw me trying to get all our documentation in order and reading Finding and managing your mortgage for dummies by Maureen Jordan every chance I get, hence the lack of blog posts. Anyway, here’s a list of the documentation you’ll need to provide before talking to a mortgage broker:

  • payslip from last 3 pay periods
  • proof of savings (i.e. bank statements for the last 6 months)
  • group certificate(s) from the previous year
  • 100 points identification for verification purposes

Armed with our papers, we talked to the adviser and he asked questions regarding our financial position plus more. Questions include how much we earn, credit limits for credit cards, other loans (if any), how much we put away for savings as well as the frequency, car model and value, number of dependents, visa status, how long we’ve stayed in our present jobs (if less than 3 years, you’d also be asked about previous employment history) and how much we’d like to borrow. Gabriel and I have looked at house prices in the weekend papers and online and we’ve agreed on our maximum price even before we went talked to the adviser, so we have a ready answer to this question. The adviser told us that based on the information we’ve provided him, we could borrow up to double the amount we were asking for. We laughed and said no thanks, since we won’t be comfortable with that level of debt. He smiled and replied that although we could theoretically borrow a large amount, it would also mean that we’d be allocating a sizable portion of our salaries for repayments. Scary thought, specially since that would mean that although we might be able to purchase a very nice house with that kind of money, we may not have anything else left to enjoy life or even for emergencies.

The adviser entered our details in his laptop and took notes during the interview and before the hour is over, the specialised software they are using recommended several lenders whose products suit our needs. Imagine our surprise when the software recommended the financial institution where we’ve been banking all these years! There were a lot of things to consider and we asked some questions regarding the product’s interest rate, ongoing fees, portability, early repayment penalties (if any), its features and how it compares to the other lenders (comparison rate). In the end, we decided that our bank’s rates are reasonable enough and the product’s features are satisfactory so we signed an application form to get a pre-approval. Besides, since there is no obligation to go through with the loan with this bank, we could still shop around and see if we could find a better product.

One hour and 15 minutes later, the interview is over and the adviser said that we’d have to wait 2-3 days to learn the outcome of our application. Papers were photocopied and signed and we exchanged numbers before going our separate ways. Fingers crossed that we get that pre-approval. Meantime, we have another appointment this afternoon with an adviser from another mortgage matching company to see if we could get a better deal. Wonder if he’d recommend our bank’s products too?

Published in: on August 22, 2005 at 2:17 pm  Comments (1)  

One CommentLeave a comment

  1. […] Get your loan pre-approval first since this would give you a budget to work with. Finding a property you like, going through the negotiation process and then later finding out that you can’t find financing is a big waste of time and effort for everyone involved. Not to mention the disappointment and regret you’d feel to let the opportunity to own the place slip through your hands. […]

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