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Everything you need to know about buying your first home with the help of a mortgage broker

October 31, 2023

Every Aussie dreams of owning their own home. But with the ongoing cost of living crisis, it’s easy to feel disheartened by the media’s gloomy portrayal of the housing market. Add to that the complex and confusing jargon banks and real estate agents throw at you, and your dreams of buying your first home may feel out of reach.

The truth is, home ownership doesn’t have to be a fantasy. Buying your first home is achievable with a game plan and a mortgage broker, like Connected Finance, at your side. With our support, you can tackle the property market head-on and come out on top.

What is a mortgage broker?

A mortgage broker is a home loan expert who assists borrowers by finding them the best home loan deal. There are many reasons to use a mortgage broker, but the most important one is that they make buying your first home easier.

Mortgage brokers evaluate a borrower’s financial situation, goals and preferences and then leverage their connections with lenders to find the best possible loan options. By comparing different offers, they help borrowers make well-informed decisions about interest rates, terms and expenses. 

Buying your first home: Mortgage readiness

Financial preparation, often referred to as mortgage readiness, is a critical step toward buying your first home. From first home buyers grants to surprise fees and requirements, this process can be complex and confusing. A mortgage broker can help break the process down into simple terms so you don’t have to stress.

Saving for a deposit of at least 20% of the property’s purchase price is a smart starting point. While it’s possible to purchase a property with a lower deposit, doing so might lead to the added expense of Lender’s Mortgage Insurance (LMI). 

Understanding your borrowing capacity is essential to avoid making hasty financial decisions that could result in mortgage stress down the road. Plus, beyond the actual house price and monthly mortgage payments, there are various upfront costs to consider, including property inspections, stamp duty, and conveyancing fees. Before diving into the world of homeownership, it’s crucial to take a step back and create a comprehensive budget that accounts for these factors. 

Additionally, your credit score plays a pivotal role in securing a home loan. Lenders examine your credit score to assess your credit history and determine your trustworthiness as a borrower. As a first-home buyer, checking and maintaining a clean credit score is crucial to simplify the home loan application process.

Buying your first home: Different types of home loans

Understanding the different home loan types is an important part of buying your first home. Each are appealing in different ways to different people. It all depends on your unique financial situation and goals.

Your loan options include:

• Variable rate loans have an interest rate that changes alongside the Reserve Bank’s official cash rate. A borrower may have lower payments when rates fall and higher payments when rates rise.
• Fixed rate loans have a locked-in rate for a set period at the start of a mortgage, which is a maximum of five years (with the exception of a few lenders who offer 10 years) before the loan reverts back to a variable rate loan.
• Split-rate loans consist of fixed and variable rate elements for a predetermined period. As the borrower, you decide what percentage of your mortgage you wish to allocate to either rate.

Buying your first home: Getting pre-approval

Before embarking on your property search, getting home loan pre-approval can be a wise move. This pre-approval offers an estimate of how much a lender may be willing to lend you. While it’s not a required step in the home-buying process, it carries several advantages, especially for first-home buyers.

This cost-free process allows you to gain insight into the amount a lender might offer before committing to a property purchase. It also empowers you with a clear understanding of your budget, enabling you to attend auctions and bid with confidence, as you know what you can afford. Plus, sellers tend to favour buyers with pre-approval, as they are seen as more credible and potentially capable of settling the transaction sooner. 

Buying your first home: Buying, closing & post-purchase support with a mortgage broker

Your mortgage broker is your home buying partner from start to finish. Beyond securing your home loan, they’re there to guide you through the property search, offering insights into neighbourhoods and connecting you with the right professionals. 

They may assist in making competitive offers, can negotiate on your behalf and ensure that all financial arrangements are in order for a smooth settlement. If any challenges arise, they’re problem solvers, finding solutions to keep your deal on track. Plus, they’ll help you understand closing costs. 

Once the keys to your new home are in-hand, your relationship with your mortgage broker doesn’t have to end. Whether you have questions about your mortgage, want to explore refinancing options, or need advice on managing your finances, your broker is just a call away. With their continued support, you can be rest assured that your investment in your dream home remains on a solid financial path.

Follow your homebuying dreams

Buying your first home? We’ve got the expertise to help you make your dreams come true. If you’re ready to take your first steps toward home ownership, come along to our free seminar and you’ll discover just how simple and easy it can be with Connected Finance.