Case study: why you need access to many lenders

When experienced property investor Tim Gordon agreed to buy a block of land, he didn’t expect the land’s mining-town location to make it difficult to secure finance. After failing to find a lender who could help him, he visited a finance broker who found just the right mortgage for his needs.

Tim Gordon, an experienced property investor and engineer who works in mining, agreed to buy a block of land in a mining town with pre-approval for finance directly with a lender. However, when it came time to settle 18 months later, the pre-approval had expired and the lender had changed its policy for mortgages in mining towns, leaving Tim with a looming settlement date and no finance.

Tim applied directly to a wide range of other lenders, but kept facing the same problem. In a bind, he visited an MFAA Approved finance broker just 10 days before settlement.

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Why does my broker ask for so much documentation?

No one likes paperwork; however, providing your broker with the right documentation will save you time and money.

What information will your broker ask you to provide?

When you ask to enlist the services of a broker, they will probably ask you for the following documentation:

• Identification, including photo ID such as driver licence
• Income verification documentation such as recent payslips
• Birth certificate, if you are applying for a government funded first home owner grant

Depending on the lender or bank you would like your broker to apply to for your loan, you may also be asked to provide:

• A recent PAYG summary
• A notice of assessment from the Australian Taxation Office
• Tax returns
• Proof of your contribution toward the transaction, such as savings or deposit statements
• Purchase contracts for a home loan, including building contracts, or plans if building

For a more extensive list, please click here.

Why is this information important?

While it may seem that you are climbing the Mount Everest of paperwork, a broker will ask for all of this to ensure they are protecting you and that they get the best possible deal.

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5 Things First-Home Buyers Need to Know

Before you decide to purchase your first property there are a number of things to consider, including your current personal circumstances and financial status.

1. Think about why you want to buy a home
Do you want to live in it or will it be an investment property? This can help determine the kind of loan you apply for and home you buy, depending on your short and long-term plans.

2. Research potential properties and loans
Knowing the market is crucial, so do some research on the areas you are targeting, check out auction clearance rates and recent sales, as well as price trends in the area. Once you are aware of what you are looking for and the approximate price, the next step is saving a deposit.
While some lenders will offer loans if you have saved less than the usual 20 per cent deposit, being able to show a record of good saving habits will aid in getting your loan approved.
Then, when you talk to your local MFAA Approved Finance Broker about applying for pre-approval on the right type of loan, ask for their help to work out what you can afford in terms of repayments.

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