Confused about broker advice

Discussion in 'The Buying & Selling Process' started by Sail, 1st Nov, 2020.

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  1. Sail

    Sail Active Member

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    Hi,

    I have been talking to a broker since a couple of months as I'm looking to buy a new property soon. This will be my first home. I asked the broker about obtaining pre-approval so he advised that nowadays pre-approvals mean nothing, so he said that he will check all my statements and documents and also perform a credit assessment (which won't affect my credit score because of the method they use) and he said that will be enough as a pre-approval, and that I don't actually need one from a bank.

    Is this sound advice?

    Also, he wants me to preferably go for non-auction properties so I can add subject to finance clause, so that makes me wonder more if this is the right advice?
     
  2. Trainee

    Trainee Well-Known Member

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    Sounds right if its a good broker. Probably has a couple potential lenders so when you pull the trigger they will apply with one of them.

    Non auction properties are ‘safer’ in that auctions are unconditional. Ask the broker how the process changes if you intend on buying at auction.

    if you dont trust the broker this is going to be a painful experience.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    What be the LVR pls ?

    ta
    rolf
     
  4. Sail

    Sail Active Member

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    I’m looking at 94% including lmi.
     
  5. Sail

    Sail Active Member

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    Broker seems reputed based on google reviews.

    I’m looking at properties in Victoria and they mostly go in auctions. Also agents in private sales straight away refuse subject to finance clause. So I am feeling restricted.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I would be avoiding auctions at that LVR!
    But a pre-approval might be a good idea.
     
  7. Sail

    Sail Active Member

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    If you don’t mind, can you elaborate why avoiding auctions be the better idea?
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You are locked in at auctions with no cooling off. What if you cannot get finance? Loss of your deposit, and more potentially
     
  9. Sail

    Sail Active Member

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    Why would my finance not get through?
    Is it because of that LVR, there is a high chance of finance not being approved?
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    I don't know anything about your situation, but borrowing 90% or more is very touch and go.
    Even at 80% it is risky.
     
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  11. jaybean

    jaybean Well-Known Member

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    Both my brokers and another broker have told me the same thing; that it's a waste of time. A good broker will be able to tell you with a high degree of accuracy how much you can borrow anyway. The entire application gets assessed properly from ground up when you actually go for the loan so it's pointless. Also I've always wondered just how thoroughly they would assess you during the pre-approval stage anyway, knowing half of them are probably tire kickers. I certainly wouldn't find it a very rewarding job.
     
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  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Have you or the brokers pulled a copy of your credit file ?

    Our team wouldnt allow a client with that sort of LVR end up under a Bus.

    Even with a pre approval there is a very small chance that you may not be able to obtain finance due to issues with the lender, security property etc.

    If the val comes in 5 % short ( unlikely) unless one has a a war chest............ouchie

    Recently even had 2 lenders PULL formal approvals with no fault of the the client or the security issues, but purely because their own credit had made an error.

    ta
    rolf
     
  13. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I wouldn’t purchase at auction when borrowing at 94% LVR - your scope of lenders is reduced.

    I would also get a credit assessed per-approval with a lender that approves LMI in house.

    While a preapproval isn’t a guarantee that formal approval will be granted - it’s peace of mind at that high LVR.

    Cheers

    Jamie
     
  14. Sail

    Sail Active Member

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    Im not 100% certain but my broker said he has checked my credit file in a way where my credit score will not be affected. Not sure how that can be done? I’ve never myself checked my credit score before.

    So basically, what would you advice - only purchase with subject to finance ?
     
  15. Sail

    Sail Active Member

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    Thanks. Guess only private sales for me with the option to back out if finances don’t get approved.
     
  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    We can have view only access which doesnt leave a major impact.

    I cant really provide advice per se, since we know very little of the balance of the transaction and risk mitigations that may or may not be available.

    if u were our client, it would be subject to finance or at the very least a PROPER pre approval.

    ta
    rolf
     
  17. Sail

    Sail Active Member

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    Yeah I agree, it’s not easy to provide advice with so little information.
    But thank you, I’ve learnt a few things (for example the view only credit check)
    Ok so I’ll avoid auctions - that’s the best approach I think.
     
  18. jaybean

    jaybean Well-Known Member

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    That's bloody terrifying, you'll have me waking up in cold sweats now every time I submit a loan application.
     
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  19. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I can certainly understand why brokers are reluctant or organise pre-approvals. It's 90% of the work and we know that more than 60% are never executed so we never get paid. It can take up a lot of time that would be better spent on applications that are going to proceed.

    At the same time, in many cases we can see that it's a low LVR, the client only wants to borrow a fraction of their total capacity and we've assessed their various documents. Even if our calculations are out, it's still an easy deal and we've got multiple backup solutions if something unforeseen does occur. In this case a pre-approval doesn't really tell us anything we don't already know so why waste time on it?

    However a 94% LVR loan is high risk regardless of other circumstances. You should get a pre-approval before buying at auction. If you're buying via negotiation, make sure there's an adequate finance clause even if you do have a pre-approval.

    The other thing I'd suggest is waiting a few months and saving a little more to get the LVR to 90% or less. Lower rates, lower costs and far more options of lenders.
     
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  20. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    This post is a great example of the practical ways a experienced broker can guide finance applications etc
     
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