If you're thinking about buying your first home, you may find all the information pertaining to property buying quite overwhelming.
As a first home buyer, there are three key terms you should know: mortgage broker, loan pre-approval, and Lenders Mortgage Insurance. Once you understand what these three terms mean, you will be able to start your home buying journey with confidence.
In this article, we define the three main terms all first home buyers should know so that you can get started on finding and buying your dream property.
A mortgage broker is someone who can arrange a home loan on your behalf. Generally speaking, they deal with many different lenders and are therefore able to find you the best home loan deal for your needs.
In addition to finding you the right home loan, they can help you identify exactly how much you can borrow, and do all of the home loan legwork on your behalf.
They will do all of the hard work so that you don't have to. Best of all, you do not have to pay for their services because they are paid by your chosen lender once your home loan settles.
At Mortgage Choice, every broker is paid the same rate of commission, regardless of which lender and home loan product you decide upon. Our ‘Paid the Same' initiative ensures we are always working within your best interests.
A home loan pre-approval is a key step in the home buying process, as it will give you a clear idea of what you can afford to spend on a property.
It's also a clear sign to a real estate agent and vendors that you're a serious buyer.
You can obtain for a pre-approval through your mortgage broker and it's generally valid for three to six months.
Lenders mortgage insurance
Lenders Mortgage Insurance (LMI) allows you to buy a home if you have a deposit that is less than 20% of the purchase price.
LMI is a one-off cost that can either be paid upfront or capitalised into your home loan. It's important to note that Lenders Mortgage Insurance protects your lender (not you) in the event that you default on your loan.
As a general rule of thumb, lenders do not like to deal with borrowers who do not have a 20% deposit. But, thanks to Lenders Mortgage Insurance, you can buy a home without a 20% deposit, and thus get yourself on the property ladder sooner rather than later.
Lenders Mortgage Insurance can be avoided if you save a 20% deposit or ask a family member to go guarantor on your loan.