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Voiceover: This podcast is for education and entertainment purposes. It's not financial advice and doesn't take into account your objectives, financial situation or needs. You should consider if the information in this podcast is appropriate for you and contact a professional financial adviser. If you are seeking financial advice.
Alan: Hello and welcome back to the Teachers Mutual Bank Bringing It Home podcast series, where we take you through the home buying process step by step from getting home loan ready to the home loan application process right through to making an offer, sale and settlement on Alan Waugh from Teachers Mutual Bank.
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Alan: And joining me again today is Financial wellness and certified money coach Betsy. Betsy's greatest wish is that every Australian enjoys financial well-being, and to that end, she's helped hundreds of people to realise their dream of becoming home owners and investors across her financial career. Hello and welcome back. Betsy, It's great to see you again.
Betsy: Great to see you, Alan.
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Betsy: Thanks for having me.
Alan: But before we get started, we'd like to acknowledge the traditional custodians of country throughout Australia and the connections to land, sea and community. We pay respect to their elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander people. So, Betsy, in episode one, we've got our ducks in a row.
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Alan: We got to know what kind of government help there is for the first home buyers in episode two. So now we're ready to apply for a home loan.
Betsy: That's right. Today we're going to be stepping our listeners through the home loan application process because navigating through it can be a little bit daunting.
Alan: It absolutely can, especially for first time buyers.
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Betsy: Exactly. And as a teacher, having set class times and working long hours can make it hard to find the time to meet with lenders and keep track of your home loan application. So it's helpful to know what steps are involved before you apply and how your lending specialist or broker can support you through the process and work around your schedule.
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Alan: Look, it can be a little bit tricky, so it might be helpful for listeners to summarise the timeline application process right off the bat. What do you think?
Betsy: I think that's a great idea. So essentially there's four key steps to the home loan application process. So number one is to arrange and meet with your lending specialist or broker to have a conversation around your needs and your goals.
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Betsy: Number two will be your lending specialist is going to explain to you your options, the products that will most suit your needs and help you to understand how much you can actually borrow. The third step at this point, you can apply for pre-approval, which will help you set your budget for your property search and means you're ready to pounce when that dream property comes up.
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Betsy: And then finally, number four, once you've found that property, or if you're going to be going to an auction as a serious bidder, you'll need to move to a full application, which includes your credit check.
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Alan: One of the questions we actually get a lot is what is the difference between lenders and brokers?
Betsy: Let's give it a quick 101 to and what's the difference? So the difference between lenders and brokers is that brokers don't represent a single lender. They get paid an upfront commission from the financial institution, the lender for introducing you, and then a trailing commission for the life of the loan.
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Betsy: It's important to know that brokers may not offer the full range of loans available directly from lenders, So it's important to choose a broker and or a lending specialist you trust and who you can meet with at a time and a place that works for you and who you have a good rapport with too. You should always be able to either engage your lender or a broker at no cost to you.
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Alan: Absolutely. So. So what can to expect when we take that first step to meeting that lending specialist?
Betsy: Well, essentially, there's someone who's going to help you. They'll help you weigh up your loan options and guide you through the home loan process. They'll discuss things like income, loan, living expenses to determine if having a home loan will affect your current lifestyle and help determine any potential changes that need to be made.
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Betsy: They'll also talk you through your expectations, goals, needs and what you want from a loan. So, for example, will it be a fixed loan variable split interest rate? And for more on this, please tune into our next episode where we're going to dive into the different loan types in more detail. If you're a first time buyer, your lending specialist will be able to talk you through any government grants or assistance you might be eligible for, and they may even be able to help you fill out that grant application work for you too.
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Betsy: Finally, they'll work you through any potential obstacles. Guide you on what documents and proof of income and other financial information you'll need to supply? And we talked about getting home loan ready in episode one to make sure you listen to that if you haven't already.
Alan: And let's talk about that now, Betsy, because a big part of a successful home loan application hinges on things like our income and employment.
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Alan: So how can we talk about what that might look like for teachers or maybe for relief teachers or teachers that work on a contract?
Betsy: Yes, great point. Being a casual or a temporary worker like many teachers are, can make applying for a home loan more difficult. Many lenders want to see more stable or a longer history of employment. But it's worth pointing out that teachers mutual bank accepts just three months of casual employment history with a minimum period of employment of three months.
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Betsy: Naturally, other lending criteria would apply, but this may be an option for you if you're a casual teacher. So that's something you should definitely talk to your lending specialist about, too.
Alan: And that brings us to the next step in the home loan application process Betsy.
Betsy: Yes, This is where your lending specialist takes you through your loan options so your lending specialist can explain the different loans and products that most suit your needs and help you understand how much you can actually borrow based on your individual circumstances.
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Betsy: And we take a look at different types of home loans and their pros and cons in our next episode. So please make sure you tune into that to your lending specialist can also help you with access to government schemes to assist you in getting into your own home sooner and guide you through the loan Guarantor mortgage insurance or limit process if that's the right option for you.
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Alan: And Betsy, can we talk a little bit about the role that the home loan specialist plays? Because it's a really important relationship in the home buying process.
Betsy: Yes. Your lending specialist really should be there with you every step of the way. So ideally, you want to have a good rapport with that lending specialist. You want to find someone that listens to your wants, your needs, your goals, and has a really clear understanding of them.
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Betsy: They'll also explain to you the process and the next step. So there's no surprises and they'll be able to offer support and guidance at each step of the process that kind of like you're doing person for the home loan process.
Alan: What should our teachers be aware of? Because bearing in mind they can't leave school in the middle of the day, they got classes so they can be quite time poor.
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Alan:So how can how can teachers mutual bank help them?
Betsy: Well, it might be important to find a lending specialist who actually works outside of usual business hours and who can meet you over the phone or face to face around class times. And that's something that I know the lending specialist that teaches mutual bank are really aware of. So they'll always work around you, whether that's coming to you at work or meeting after hours, either over the phone via video call or face to face.
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Betsy: So it's really about what is going to be the easiest option for you.
Alan: I think that's really important for our listeners to be aware of. So we're moving through the stages and the next stop is now getting pre-approval. Can you talk us through what that process actually is?
Betsy: So what is a pre-approval and how does it work? Essentially, getting a pre-approval sets the expectation on how much you can spend and gives you confidence that you can take that next step in your home buying journey.
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Betsy: A pre-approval lasts only 90 days, so if you don't find a property within that time, then you can go back again for another pre-approval, pre-approval or conditional approval is often subject to security. So for a loan that has been conditionally approved based on your income, the bank will still need to accept the property you want to purchase as a security.
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Betsy: That will still be another step to take. What a pre-approval is though, is it useful for your budget. And it makes a difference when you're looking at property for sale through private treaty as opposed to sale by auction. What it isn't is a formal approval. Sometimes that often referred to is unconditional approvals as well for says that's something to be mindful of.
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Betsy: But basically what it means is the lender hasn't fully approved it. Formal approval is granted after the bank values and accepts the property as a suitable security. So you only move to a formal approval. Approval in principle, conditional approval and full approval. When you've found the property you want.
Alan: Okay, so let's go to the next part, which is choosing a Lender.
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Alan: That's really important and let's just don't have to take out a home loan with the bank that currently will do that.
Betsy: No, absolutely not. It's your right as a consumer to get your home loan with anyone you choose. So the way that I would think about it, when I was looking to find the right lender for me would be shopping around to see what different banks and financial institutions are offering, who's got great rates, but also considering who's the lending specialist and do you have a good rapport with them?
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Betsy: Do you feel listened to? Do you feel like your needs are being understood? That's what I'd be looking for.
Alan: All right. So that brings us to the next step in the home loan application process. Once we've found our property and make sure you tune in to episode six for more on that later. But Betsy, let's talk listeners through this step.
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Alan: Moving from pre-approval to formal approval.
Betsy: This is the final step of the home loan application process. So once you have found a property or if you're going to go to an auction as a as a serious bidder, you'll need to move to full application. So your lending specialist will guide you through the application and let you know what else might still be needed to provide your application.
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Betsy: At this stage if you haven't already had an offer accepted on a property, your lender can provide a conditional approval that is still subject to a few more steps, such as a property valuation when you found that property conditional approval also might be a requirement if you're applying for any of those government assistance scheme, again refer to your lending specialist because they're going to help you with this conditional and full approvals are formal approvals and include a credit check, which is why it's so important for your credit to be healthy and also for you to only apply with one lender for your pre-approval and full loan approval.
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Alan: Alright, so now we've given our listeners a better idea of that home loan application process, but things can still get in the way. So how do our listeners give themselves a better chance of getting that full approval?
Betsy: Okay. So a couple of things that might trip you up at that final stage of the hormone application of things like if you haven't provided the right information, so you haven't provided the right proof of income.
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Betsy: And this is where that home loan checklist is really helpful to have, handy to remember what it is that you need to be providing. And of course, you can download one from our website if you have a negative credit history when the bank does your credit check, that also might trip you up at the last minute. So again, this is why it's so important to have a good healthy credit before you go into the application.
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Betsy: And other things that might come up is if you've made multiple inquiries with different financial institutions for your home loan, you can inquire, obviously to a few different institutions to see what they're offering, but make sure you haven't signed anything. Make sure they haven't done a credit report. As other financial institutions can see, your credit reporting history and having too many inquiries might actually impact your borrowing power.
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Betsy: So there are a couple of things to watch out for.
Alan: Well, again, thank you so much for those tips. Betsy. I'm think we're giving our listeners every opportunity to get that home loan approved. And always great to speak with you. And thanks again for joining us.
Betsy: Thank you.
Alan: And thank you to listeners for joining us. We hope you enjoyed episode three of Bringing It Home podcast.
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Alan: Make sure you tune into episode four, where we take a look at the different types of online options on offer from fixed term to variable and everything else in between. And remember, if you have any questions about the home buying process or you want to speak with one of our lending specialists, please give us a call or make a booking on our website to speak with a lending specialist at a time at a place that suits you, including after hours at your place of work, at home, or even via video.
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Alan: I look forward to catching up with you in the next time.
END OF EPISODE
