Choosing a Home Loan – Part 1

When it comes to home loans, there are hundreds of finance companies available to choose from. Deciding which lender to work with can be a somewhat time consuming process, but it is the most important step. Not everybody has the time to do all of the research themselves, and without knowledge of the industry it is even more difficult. For this reason, it can be extraordinarily helpful to have a mortgage broker on your side. They will not only make it easier for you to find the right bank for your financial situation, they will make the application process itself much simpler by letting you know exactly what information you need to gather up for the application.

What Does a Good Mortgage Broker Look Like?

When looking for a broker, it is important to find one who has access to a very large range of financial institutions in order to find the best home loan deal. Take the necessary steps to ensure that your broker has a great deal of contacts throughout the financial industry. They should have access to more than just the major lenders, and they should make a great deal of effort to learn everything they can about your financial situation in order to ensure that you are getting the best deal for your needs.

How Much Can I Borrow?

Before you even start looking at homes, you should already know how much you can borrow. While every bank and mortgage lender is different, they all follow a similar set of guidelines in determining what your borrowing capacity is. They will consider the ratio between your value and your outstanding loans, your total income and the type of income, and your credit card limits. The number of dependents you have will be an important factor, as are your current assets, and various other factors. To increase your borrowing capacity, you can pay off more of your current debt, pay off your credit cards, and improve your savings history.

Should I Consider Pre-Approval?

Pre-approval is the best way to buy a home. Before looking at homes, you should know how much you can borrow, and how much it will cost you each month. Just because a finance company says you can borrow a certain amount, doesn’t mean that it will be a calm and stress free amount to pay each month. Take a realistic look at what you are willing to pay each month. Use a home loan calculator to determine the size of your payments, and how long you will be paying them. Once you are pre-approved, and you know exactly how much you will be paying each month based on the price of a home, you can make much better decisions about what to look for.
Despite the name, pre-approval does not mean that you are approved. It is essentially a statement of how much the bank thinks that it is willing to lend to you. In order to be fully approved, a valuation process will need to take place in which the bank determines your total value. This should be done before you agree to buy any homes.

Negotiating a Better Interest Rate

It is often possible to get a better interest rate than the one first offered by the mortgage company. This is more and more true the larger the loan. If you are considering refinancing, this can also give you additional bargaining power. In addition to negotiating the interest rate, you can also negotiate establishment fees that you can pay. If you find competitors who are willing to waive the establishment fees, this can be especially helpful. Of course, this part of the process is much easier if you have a broker on your side.

Source: 2010, StampDutyCalculator.com.au

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