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- Do a personal budget - this will help you identify where all your money goes. You probably know already, but this process will quantify your expenses and expenditure. You can then plan where to trim your expenses and increase your savings. To help, you can request a copy of our FREE personal budget analyser.
- Find out how much you can borrow - our free calculator will estimate your maximum borrowing power. Most online calculators can only give you a general estimate. If you want a more accurate figure based on your specific circumstances then there are other lending criteria that will need to be considered. Alternatively, complete an Enquiry form and Finance Cafe can do an individual report for you.
- Select a finance solution that suits your budget, lifestyle and future plans - there’s lots of product choice, feature combinations and variations that can be matched to your specific circumstances. You may want features such as internet banking, cheque book, VISA card, offset account or line of credit facility, a mix of fixed and variable rates, or just a plain and simple, principal and interest loan just like our Mum and Dad used to have. We can guide you through this selection process and come up with a package to suit your needs.
- Get pre-approval - Loan Pre-qualification and Loan Pre-approval
There is nothing more frustrating than spending every weekend searching for a home only to discover that once you do find one, your bank will not lend you the money to purchase it. To avoid this frustration, Finance Café offers potential homeowners and property investors two free services to make this process a lot easier.
- Loan pre-qualification and
- Loan pre-approval
Loan Pre-qualification
We take a quick snapshot of your current financial position. This means getting an estimate of your income, existing credit commitments such as credit cards, personal loans mortgages and savings. This information is input into our home loan software allowing us to determine your borrowing capacity and which lenders you qualify with. Loan pre-qualification is a great place to start and if your position is positive then you should go the extra step and obtain loan pre-approval prior to beginning your house hunting.
Loan Pre-approval
Loan pre-approval is a more rigorous than a pre-qualification. All aspects of your pre-qualification are verified by supporting documentation such as pay slips, tax returns, savings account statements, credit statements and other assets and liabilities. If you are self-employed you will be required to supply copies of your most recent tax returns as well as financial statements for your business. For Lo doc and asset type lends this is not required.
As part of the pre-approval process, a lender will also access your credit report. This report lists all credit enquiries, approvals and defaults. You should be familiar with the contents of your credit report and for a small fee ($27.00) you can obtain a copy from mycreditfile.com.au.
What are the advantages of pre-approval?
Obtaining a loan pre-approval gives you an advantage in the market:
- Knowing the exact amount you can borrow. This allows you to spend your time looking at homes that are in your price range rather than waste your time looking at homes that you ultimately cannot afford.
- Giving you an advantage over other potential home buyers. Pre-approval lets sellers know that the bank has agreed, in principle, to approving your mortgage loan for homes within a certain price range. While not a guarantee, pre-approval tells the seller that a bank or lending institution has looked at your credit report and income and considers you to be someone who is likely to qualify for a loan.
In a multiple-offer situation (i.e. more than one buyer is interested in the same house and both make an offer), the buyer with pre-approval will be given more serious consideration than the buyer without pre-approval.
- If your loan application is not pre-approved you will be referred to one of our loan counselors and given a plan to help you obtain a loan approval as quickly as possible.
- Pre-approval conditions
A lender's pre-approval is a time limited offer (usually 3 months) and conditional commitment to fund your purchase. Conditions usually applied to a “Conditional approval” are:
- Building and pest inspection report and
- Valuer’s report
These reports are as much a benefit to you, the borrower as it is to the lender. After all, if the inspector finds structural faults not only is the lender less inclined to give you a loan, but you are also less inclined to take one for that property. The same holds true if the valuer finds the house is worth considerably less than the seller is asking. None of these factors affect your pre-approval, however it does mean that the lender may not be willing to grant you a loan for that particular property - which may be just fine with you.
- If the pre-approval period runs out before you find a home, you can reapply. Unless your financial commitments, employment or credit rating has changed, you will probably be pre-approved again.
- Choosing a home
The final and probably the most exciting step is choosing a property to buy. All the hard work has been done and now you are ready to make a considered choice. You’ll be prepared because you have a bargaining position with pre-approval and your checklist of desirable features you did in step one. Doing an online search is probably the quickest and easiest ways to fine tune your search but connecting with a reliable real estate agent in your preferred areas is also a good idea. There maybe properties that aren’t on the internet that you should also consider and your local agent would know.
Useful property search engines:
1. RealEstate.com
2. Domain
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 Overcoming obstacles to finance
Lending for property in Australia still presents a number of obstacles for people wanting to purchase property or refinance an existing mortgage. A key element of this is that borrowers are constrained by how much they can borrow. As a consequence, so are their opportunities, choices and lending options. Banks limit what people can borrow by -
- limiting the loan size to a maximum dollar amount. If the limit is exceeded you have to make up the difference.
- limiting the loan amount to a percentage of the property’s value (Loan to Value Ratio - LVR)
- limiting the loan amount to what you can afford to repay (your serviceability) and is assessed using a number of financial ratios.
- or all of the above.
The difference between what you require and what you can borrow is your deposit or contribution and has to be made up by you, the borrower, in cash. This means you have to either -
- work and save to make up the difference (usually takes too long and you miss out on the opportunity)
- “beg, borrow or steal” (you have to have good friends or family members with wealth)
- convert existing assets into cash (sell everything)
- forget about the whole idea.
Deposit options
Luckily there are other financing options available that can give you the chance of purchasing a home or investment property. Read more ...
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Have a definite plan - you first choice is to decide that having your own home is something you really want to do. You might be fed up with renting, you may want to settle down and start a family. Whatever the reasons, your heart has got to be in it. Our experience shows that the main fear that people have about taking on a mortgage is that they are frightened of the debt. What many fail to realise is that a home is also an asset that will grow in value over time. And the profit you make when you sell it is tax free. Sooner or later, if you are like most of us - you’ll buy a property. Since property historically does go up in value, its better if its sooner rather than later.