You will be able to service a mortgage if you have a steady income. This may include a few months of history. How do you find a lender that is flexible to your changing employment terms?
Borrowers want the best home loan product. They want the lowest interest rate available at the time they apply for a loan. This allows them to pay less principal and gets them to the finish line faster.
Karen Blee, a mortgage broker at Aussie Home Loans Joondalup, shares her thoughts. It boils down to finding a lender who is willing to lend you money if your financial situation meets their approval criteria.
“Most people focus on the interest rate and they [aim to secure] the best interest rate, and yes, you want the best interest rate, however it’s the lender’s policy that allows you to get the interest rate,” Blee explains.
“So, if you go to a bank and you don’t fit within their policy then they have a couple of variations, [and they may say] ‘but no we can’t do this’, so then you go to the next lender and the same thing [may happen], but with a broker that has access to 23 lenders, then we know, ‘right, this application will fit best here’.”
Blee was approached to assist a couple in Perth with their dream home. A key aspect of their application was in doubt and one that the lenders had a lot of weight on: Their income.
Signing employment contracts, employees can borrow money
While one person’s employment was considered by a particular lender, the other, a qualified nurse, had been in the process of securing a new job before her existing work contract were to expire. A successful interview led to a new work contract that was available for approval in order to get a home loan.
“Most lenders need not only a contract, but they need the first pay slip and they want to know that you are not in that three-month trial or probation period, so depending once again on the policy, each different lender has a different policy around employment, or self-employment,” Blee explains.
Blee was able match the couple to a lender that would allow them to change their employment policy. Because the job was one that the borrower had previously held, the lender required only a signed work agreement to issue them with a seal.
But with the settlement date of the property drawing nearer and the borrower’s new employer facing their own delays with finalising the details of the work contract, time was starting to run out for the couple.
Blee quickly reacted. She not only connected with the lender to explain the couples’ situation but also contacted the real estate agent and the vendor of the property, and as a result, she successfully extended the settlement date by up to 28 days (although once settlement was finalised, the vendor had only kept the property off the market for another two weeks).
“Everything came together, and we got the contract, and we got the finance, and they got the house – everyone was happy,” Blee shares of the final outcome.
“The nature of employment is changing, there are a lot of contract workers out there and things are a lot more flexible and will become more, also, [but] that’s terrifying for banks because they want consistency.”
Working with the lender’s policy
It’s the professional relationship and level of trust that Aussie mortgage brokers have with their accredited panel of lenders and their business development managers that makes all the difference, Blee shares, most especially when working through any changes or sudden obstacles that can intrude on a borrower’s application process running to schedule.
“Because everything changes so rapidly at the moment, you have a relationship with the business development manager and you say, ‘this is the [client’s] scenario, how does it fit with your policy?” Blee says.
“It’s a process and it does get very stressful, and our job is to work people through the process, and [they need to] understand that this is not always an easy process, which is why you need a broker.”
A qualified and professional mortgage broker can help borrowers to understand the limits of their confidence. They can also help borrowers understand the costs of buying a home or applying for loans.
Reflecting on the couple from Perth, Blee says: “I had used a data report. I knew how long this property had been up for sale. [the vendor] had multiple offers around $525k, and my client said, ‘nope, they are not going to take our offer’. I said to them, ‘the property has been on the market for a while, you don’t know unless you ask – you just want to get to the table and negotiate’.”
The couple went on to purchase the property in Perth for $495,000 – well under the previous offers.
“They were very happy, and they did send me a lovely email saying that I pulled off a miracle,” Blee laughs.
Do you need a loan, but not sure if you are eligible? These tips will help you choose the best home loan.