The first thing you’ll want to do is research the type of mortgages available from different lenders. Loans can differ significantly and you will want to factor several considerations – including fixed or variable rates, payment plans and other terms and conditions – into your final decision.

You will also want to set yourself a budget and determine the amount of money you need to borrow. Getting pre-approved for this amount could be a wise idea if you are still shopping around for the perfect property. Pre-approvals tend to last for up to six months and can help you move more quickly once you have found the perfect property.

During this application process, you’ll be asked for several pieces of documentation. If you are self-employed, you may be asked to show tax returns and other financial information from the past two years, while anyone who is employed will need to show evidence of their pay slips. Group certificates and 100 points of ID may also be requested.

If you are a property investor, you are probably aware of the fact that sourcing a loan for investment properties is a different proposition to finding the right loan for a home in which you will be residing. Property investment loans come with different features and options, such as interest-only repayments, and you generally need to have a solid deposit.

The minimum deposit you need for an investment property is usually 5% of the purchase price in genuine savings. The dollar amount will obviously vary depending on the cost of the property, and depending on the terms of the loan, you might not need to provide a cash amount.

If you do not have enough for a cash deposit, consider using the equity in your other properties as security for your loan. This will eliminate the need for a cash deposit. Alternatively, you can have a family member, such as a parent or a sibling, guarantee your loan – as long as they have enough cash or equity to cover 20% of the purchase price of the investment property in a property they own in Australia. These options can make it easier and quicker for you to get started in property investment.

You should also allow sufficient funds to cover associated costs, such as stamp duty, borrowing fees, and legal fees for settlement.

Using A Broker

Many buyers now rely on Mortgage Brokers to get their property loan. The main reason for this is they understand the relationship between debt and income with regards to all lenders borrowing criteria.

If you have a credit card with a $10,000 limit, then your borrowing power will be reduced by around $40,000. If you have a personal loan of only $6,000 your lending capacity could be reduced by as much as $19,000. Most people do not know or understand this relationship but luckily a good broker does and will guide you through the process of preparing for a loan application so that you get the best result and highest loan option available.

The broker will advise you what to do in preparation for applying for the loan. In some cases this may be cancel a credit card, cancel store cards, eat at home for a few weeks to increase savings and finally if all else fails, sell one of the kids…..

Each bank has its own lending criteria and the broker will know all of them. When you go to a bank, you are only offered that banks products and they may not suit your requirements or situation. The broker may know that ANZ does not have a product that suits however WESTPAC may be the best solution. So instead of getting a knock back and feeling deflated, the broker will only send the application to the lender who he knows is looking for that type of client and loan.

We always strongly recommend that a buyer talks to a broker before they contact the bank. Often if the bank says ‘no’ that does not mean the buyer does not qualify for a loan, it just means they do not qualify for that bank’s types of loans.

To increase your borrowing power you have 2 clear pathways. Firstly reduce debt, and secondly increase income. Sounds simple enough but let’s look deeper.

Reducing debt simply means trying to pay out any credit cards or personal debts that require ongoing monthly payments. The bank’s lending formula really impacts on total lending power if monthly payments are required to other sources.

Increasing your income might sound easy also, but most of us have been trying to do that our entire lives. One way to do this is to buy the property with a partner which increases total income (2 incomes) and increases lending power. Another way is to make sure you add all income such as rebates, rental income and deduction and make sure the lender values your employment type or status. Some lenders only value 60 -80% if income earned while casually employed while others may recognise 100% in their criteria for lending.

A broker knows all the criteria of every lender and they will find you the best possible outcome. They do the leg work and you get the rewards.

Brokers v Banks

Banks only offer their own loan products and unless you fit their specific lending criteria, you may struggle to get approval even though you use their qualifying calculators online.

Brokers on the other hand have access to hundreds of loan options from every bank and can tailor your needs to the most suitable product from which ever bank suits.

Mortgage brokers are paid on a commission basis which means they’re invested in your application and will work hard to get you approved and provide you with an amazing service. Because they’re experts in credit, they can answer all of your burning questions instead of directing you to another department.