For first home buyers, the process of getting a home loan can often be mystifying. Not only that, the amount of incorrect information that can be read on the internet, discussed between friends and colleagues over brunch, or delivered from parents is astounding.

Yes, getting a mortgage can be difficult, but thousands of people do it every day, and with the help of the right professionals, such as an expert mortgage broker, you to can take a step closer to your dream of owning your own home.

Over the years, I have helped hundreds, if not thousands of young Australians through the processing of getting approval and settling on their first home loan. These are some of the myths and misconceptions I hear most often when consulting with my clients.

Shopping around for the best deal can ruin your credit score.

Myth! Credit scoring companies, such as Equifax (previously Veda) understand that as a consumer you are going to want to shop around for the best deal on your home loan. Whilst having multiple enquiries on your account can lead to a lower score and be seen as less desirable for lenders, as long as these enquiries are all of the same types, i.e. Home Loan Providers, and occur within 30 days then there is no negative impact to your overall credit rating.

Getting the best rate on your home loan is absolutely vital as this will impact the total interest you pay and the monthly repayments that you commit to. This can have a huge impact on the family monthly budget, so make sure you are looking into all options, or that you have enlisted the help of a professional mortgage broker.

Pre-approval is the same as pre-qualification.

Myth! Pre-qualification and pre-approval are very different, even though they sound similar. Getting pre-qualified for any kind of loan is a very quick process and usually happens instantly after answering a few questions online to profile you as a consumer to see how your answers fit within the lender’s ideal borrowers profile.

These questions are usually surrounding your current financial situation, income and any other loans or debts you might be carrying. If your answers fit within a certain range, then pre-qualification is often automatic.

This being said, just because you have pre-qualification doesn’t mean you will be pre-approved which is a much more in-depth process.

A pre-approval is a banks way of saying that when you find the home, they are committing to providing you with a loan up to a certain value. As you will understand, this means that as a borrower you will need to provide evidence to your answers in a pre-qualification and actually go through a more formal application process.

Over the years, I have had a number of clients come to me needing assistance as they had been pre-approved, but rejected at the application stage. In most cases, this isn’t a problem, as we were able to successfully get them approved by different lenders, or with additional documentation.

Your credit score needs to be perfect in order to get approved for a home loan

Myth. Whilst a good credit score definitely goes a long way in getting you approved for a home loan, there are a lot of other factors at play for both lenders and borrowers alike.

Lenders take into account many factors when considering approval. This includes credit score, but also income, total debt in other areas such as personal loans and credit cards, ability to service the loan facility, other assets such as share portfolios or other properties and more.

More importantly, there are many ways to gain approval even with a less than desirable credit score, such as seeking out a loan guarantor or providing an additional deposit amount to offset some of the risks to the lender.  Regardless of your situation, if you are at all concerned about how your credit score will affect your application you should absolutely speak to a mortgage consultant to devise a strategy to deal with this potentially impactful factor in your application process.

If you want to get approved, you need to get rid of your other debts and loans.

This can certainly help you on your way to approval but is not a hard and fast rule. Most lenders understand that borrowers will be holding some kind of debt. It is the amount of debt and your ability to service this in addition to a mortgage that they will really be considering.

In actual fact, having existing debts that you can show are being managed and proactively paid off can often be a good thing as it speaks to your ability to pay and consistency when it comes to servicing your obligations.

Many young Australians dream of owning their own home. Whilst it can be daunting, obtaining approval for your first home is definitely possible with the help and guidance of an expert mortgage broker. If you have any questions or would like to discuss your current plans, please feel free to reach out.

Bernie Kyne
Mortgage Consultant
0400141757
bernie.kyne@mortgage-express.com.au