When I bought my first home, I used a mortgage broker, like most people do. Looking back, there are a few things I wish I had understood earlier.
If you’re a first home buyer, these three tips could help you borrow smarter and buy with more confidence.
1. Your pre-approval isn’t always your maximum borrowing power
I received a pre-approval from a major bank for a set amount. My broker told me to stay within that number, so I assumed that if I offered more, no bank would lend to me.
That wasn’t necessarily true.
Each lender calculates borrowing power differently. If you can get approved with a major bank, another lender may be able to lend you more.
This matters a lot if you’re self-employed, as I am. For example:
- Some lenders use the lower of your last two years’ income.
- Others use your most recent year’s income.
If your income this year is much higher but the financial year hasn’t finished yet, a low doc loan may be an option. These loans let you verify income with documents such as BAS statements or an accountant’s declaration instead of full tax returns. The trade-off is that low doc loans usually come with higher interest rates, and you’ll often need a bigger deposit.
At the time, nobody explained any of this to me. (If you’re self-employed, our self-employed home loan guide covers this in more detail.)
That’s why it’s important to work with a broker who takes the time to explain your options, not just the one who can get you a quick approval.
2. Interest rates are temporary. Your property isn’t.
Everyone wants the lowest interest rate. But rates change. Banks can adjust variable rates at any time, and fixed rates only last for a set period.
You can refinance later to get a better rate once your situation improves, for example when your income increases or you’ve built more equity. Keep in mind that refinancing means meeting the new lender’s criteria at the time, and there may be costs involved.
What you can’t easily change is the property you bought.
Ask yourself what matters most to you:
- Getting into the market sooner?
- Securing a property you actually like?
- Or saving a small amount of interest in the short term?
In many cases, paying a slightly higher rate for a year or two costs far less than missing out on the right property, or settling for one you don’t really like.
3. Be realistic about your first home
This is something I see often with first home buyers, and I went through it myself.
Most of us have a long wish list: location, size, layout, school zone, renovation potential and more. But your first home usually won’t tick every box.
Instead, pick the three or four things that matter most to you and be flexible on the rest.
Your first property is often your entry into the market, not your forever home.
Frequently asked questions
Is a pre-approval the most I can borrow?
Not always. A pre-approval reflects one lender’s assessment. Other lenders may assess your income and expenses differently and could lend you more, or less.
Can I get a home loan if I’m self-employed?
Yes. Many lenders offer home loans to self-employed borrowers. The right lender depends on how long you’ve been in business, how your income has changed and what documents you can provide.
Thinking about buying your first home?
If you’d like to understand your borrowing power and what options are available to you, get in touch with Cleverly Finance. I’m always happy to help.
This article is general information only and does not consider your personal circumstances. Lender policies change regularly, so please speak with a mortgage broker before making any decisions.
