Getting a mortgage can be a confusing and overwhelming process, especially if you’ve never done it before. To make matters worse, there are a lot of myths and misconceptions out there to contend with. To that end, I’ve decided to set the record straight.
Below are three of the most common Australian mortgage myths. I’ve debunked them for you so that you can go into the mortgage process – confident and well-informed.
Myth: Being pre-qualified is the same as being pre-approved.
Fact: These two terms may sound the same, but they’re very different processes. You can get pre-qualified in just a few minutes by answering a few inquiries about your financial situation. On the other hand, the pre-approval process is more thorough. In the pre-approval process, your financials will be vetted by a lender before they make a decision. If you’re approved, you’ll be provided a maximum loan amount based on how much the bank is willing to loan you.
These days, being pre-qualified isn’t worth much. Sellers prefer a pre-approval since that’s a much more concrete and accurate representation of your ability to actually buy a home.
Myth: To qualify for a mortgage, you need to have perfect credit.
Fact: This is one of the biggest Australian mortgage myths. While it’s true that credit plays an important role in your ability to get a home loan, it doesn’t need to be perfect. If you have a low credit score, there are several mortgage solutions that you can explore.
Few people have perfect credit – and that’s not what mortgage lenders are looking for anyway. If you pay your bills on time and have a steady income, it may be possible to qualify for a mortgage. Also, the minimum credit score you need will depend on the type of loan you’ll get.
Myth: You have to work with the lender that pre-approved you.
Fact: Getting pre-approved by a lender is the first step towards getting your new home loan. However, getting pre-approved by a certain lender doesn’t mean that you have to work with them once you’re ready to buy. In fact, it’s in your best interest to shop around and compare terms from several lenders so you’ll get the best deal possible.
There are a lot of Australian mortgage myths out there that can make the process more confusing. Hopefully, I was able to help dispel some misconceptions about the mortgage process, while helping you become more confident and well-informed in the process.
Will Bell Mortgage Broker is a mortgage and finance broker based in Melbourne specializing in residential home loans. Will is all about the average Australian understanding just enough of the broader economy to take action on your own personal economy. He is the host of the My Personal Economy Podcast which you can check out here.
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