Taking Control: How First Home Buyers Can Beat Investors

With property auctions and clearance rates spiking in nearly every state, the battle for homeowners has never been as heated between cashed up investors and first home buyers, says leading mortgage broker Loan Market.

Loan Market director Mark De Martino said if a first home buyer was going to bid at an auction it would be massive benefit to have a pre-approved home loan so they could compete with investors bidding confidently with equity.

“Pre-approval gives a purchaser the confidence to know exactly what their limits are and what going above their target price range will do to their repayments. Buyers who go into an auction or a private treaty arrangement without pre-approval are playing russian roulette with their finances,” he said.

Mr De Martino said that potential buyers needed to make sure they were getting the right type of pre-approval – one that was granted after a full assessment of their credit situation.

“Many potential buyers mistakenly think they have been approved for a home loan after filling out a simple online form and that’s a dangerous situation, because a buyer could mistakenly bid beyond what a bank will actually lend them after fully assessing their finances,” he said.

A proper pre-approval takes into account a borrower’s income, outstanding debts and past credit history as well as mortgage insurance approval if the loan to property value ratio is above 80%. Mr De Martino pointed out that a pre-approval from a mortgage broker will most importantly be from a lender whose product is matched to that borrowers financial situation and goals.

“Banks all lend money differently and if you go to just one, you may find your borrowing power is significantly less than you thought because that lender places a higher emphasis on a particular aspect of your application. We’ve seen instances where the difference can be in the hundreds of thousands.”

“A mortgage broker can match the strengths of your situation to the right lender who will put you in the most suitable product,” he said.

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