First home buyers, here's how to compete with investors: Raine & Horne

Fewer first home buyers were recorded this spring as a result of rising prices, dominant investors, and a shortage of properties, according to Raine & Horne executive chairman and chief executive Angus Raine.

“However we shouldn’t underestimate the impact the GFC-driven tax breaks a few years back had in flushing out many first home buyers earlier than normal,” he says.

Matthew Brown, NSW state manager for Your Broker, Raine & Horne’s financial services division, notes that while investors have an added advantage, strategic planning could help first time home buyers compete with investors for entry-level in today’s buoyant property market.

“Investors do have an advantage as many have the experience and the financial capacity to push through a fast contract exchange in a few days, where it often takes first time buyers eight to 12 days to get to the point of exchanging contracts,” says Brown,

He adds that Your Broker guarantees loan approvals in five days, if the borrower provides all required documentation.

“To compete, first home buyers need to be confident that they can make an offer for a home as soon as possible to compete with investors, and this is where a fast approval process, facilitated by a mortgage broker, can be helpful.”

Brown advises that the basis of a fast approval is a pre-approved home loan.

“To obtain a pre-approval, buyers are asked to submit loan documentation such as employment history, wages and salary information, assets, and liabilities such as credit card debts, while a lender will also usually do some credit checking,” says Mr Brown.

“A pre-approval gives you some confidence about how much a lender is willing to lend, which is useful information to have when making an offer on a home.”

While a pre-approval does not guarantee a successful or quick approval, Brown says it demonstrates to real estate agents that a first time buyer is committed and serious.

Secondly, a clean credit history can help fast-track the mortgage approval process for first home buyers.

Brown adds that part of Your Broker’s services includes a financial health check that evaluates a first time borrower’s credit history and risk.

Thirdly, a larger deposit could help speed up the approval process by up to five days.

“Where a borrower fronts up to a lender with a deposit that is less than 20 percent of the value of the property, they will be forced to pay Lenders Mortgage Insurance (LMI), which covers the lender in the situation where they default,” says Brown.

“Having a bigger deposit reduces the lender’s risk but also speeds up the approval process, as LMI approval is not required – LMI approval can add up to five days to the overall mortgage approval process,” he says.

Diane Leow

Diane Leow

Diane has spent her entire career in the world of digital. She is passionate about delivering the best content to a world that is becoming increasingly jaded by the news. She also believes in the importance of great journalism and how it can change the world. Oh, she also drinks a lot of coffee.

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