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This is a sponsored article, written by the epic team at Hunter Galloway
Today, I’m going to show you 7 common mistakes that Nurses make with their home loans in 2022
Buying a home is a long, stressful, and complicated process. With so much going on, it’s easy to make a mistake. And any mistake can be a potential disaster.
Make the wrong move, and you could lose thousands of dollars or delay your ability to buy a home or an investment property for 12 months or more.
These same mistakes almost cost Krish & Sharnelle a year of waiting to be eligible for a home loan.
So if you are a Nurse looking to buy your first home this year, or if you own a property and are thinking about buying an investment property, this is the post for you.
Let’s dive in.
Not Knowing what perks Nurses are eligible for
Banks and lenders have been giving special home loan discounts to medical professionals for decades.
But until recently, these discounts were limited to doctors, dentists, and vets only.
Now, banks and lenders are recognising that Nurses deserve special recognition as well.
A few banks released special home loan products for Nurses in October this year with some fantastic perks.
The most amazing benefit is that you are eligible for a lender’s mortgage insurance (LMI) waiver for up to 90% of the home or investment property value.
LMI is an additional cost that banks and lenders charge if you’re buying a home with less than a 20% deposit. The insurance is to protect the bank if you default on your loan repayments. It’s not optional, and it’s not cheap.
For example, an average home buyer looking for $500,000 home with a deposit of $50,000 would need to spend around $12,000 on LMI. And if they were buying a $1,000,000 home with a $100,000 deposit, that cost skyrockets to $40,000 or more.
Luckily for you, as a Nurse, you won’t have to pay that fee if you are buying with a minimum of a 10% deposit.
There are a few eligibility requirements for this LMI waiver. Here’s what you need:
- Your total income must be more than $90,000 per year
- You hold a good credit rating with no defaults
- You are working as a Nurse or Midwife
Your income can include overtime and allowances, and there are no issues if you’re working at multiple hospitals as we can use your aggregate income to meet these criteria.
They will consider most Nurses and Midwives working, including:
- Registered Nurse
- Clinical Nurse
- Clinical nurse consultant / Clinical nurse consultant
- Midwife
- Endorsed midwife
- Nurse Practitioner
- Nurse manager
- Nurse educator
- Critical Care Nurse
- Family Nurse Practitioner
At this stage, unfortunately the banks have said Enrolled Nurses arent eligible for the offer.
You don’t even need to be working at a hospital – you can also be working in emergency care, aged care, general practice clinics, community health services, schools, and rural & remote communities. More info on this offer, click here.
Missing out on special home loan discounts for Nurses
As a Nurse, you’re also eligible for special home loan discounts.
Since you’re a low-risk borrower, the lenders are willing to give you a discounted interest rate compared to the publicly available rates.
This is another great benefit, and it can add up to significant savings over the lifetime of your loan. A discount of just 0.2% off the standard rate on a $450,000 loan would save you nearly $18,000.
If you have an existing loan you may be able to save a large amount by refinancing, some lenders are evening offering $4,000 cash back incentives to switch lenders. Speak with a mortgage broker to find out more info and if you are eligible.
Trying to do it all yourself and getting overwhelmed
Working in healthcare takes a heavy toll. You have to deal with shift work, odd hours, chronic understaffing and overwork.
At times, this industry doesn’t leave a lot of time or energy for much else.
And buying a home is another massive stress. Finding the right home and the right home loan takes a lot of time and hard work. It’s another added burden that you don’t really need, and if you try to do it all yourself, you risk making a mistake somewhere along the way.
And any mistakes can be costly. You could lose money because you didn’t find the best deal. Your loan could be declined. And if things go really wrong, you could lose thousands of dollars.
Every lender has their own credit policies, and they’re often so complicated that some of the banks’ own staff don’t understand them. And every time you apply with a different lender, it adds an enquiry to your credit file. If you have too many enquiries in a short period of time, it will be even harder to qualify for a loan.
To maximise your chances of success, you need a support team.
If you’re pressed for time and too busy to search for properties, then you can enlist the services of a buyer’s agent who will do the searching for you.
And when you’re ready to apply for a loan, contact a mortgage broker. Mortgage brokers know the ins and outs of all of the different lenders and their loan offerings. Thanks to their deep knowledge of lender policies, they can often get a tough home loan approved – even if the bank would typically decline it.
Brokers can also typically negotiate a better interest rate than if you were to go to a bank directly.
And the best part of using a broker is that their services are absolutely free to you! Banks and lenders pay brokers a commission for all of the work that they do in preparing and submitting your loan application, so there is no cost for you as a customer.
Getting shortchanged by your lender
If you do choose to go it alone, then there’s a real risk that you’ll get shortchanged by your lender.
While there are over 40 different banks and lenders offering home loans in Australia, there is only a few lenders who offers a specialised loan product for Nurses, and understand overtime and other income intricacies specific to Nurses. .
If you apply with the wrong lender, you’ll end up paying thousands of dollars in unnecessary fees and excessive interest rates.
This is especially true if you apply with your current bank. They already have you as a customer, so they are much less interested in offering you a good deal – they call this a loyalty tax, the difference between interest rates for exiting customers and new to bank customers.
If you’re planning on searching for the best home loan by yourself, then make sure you compare and get quotes from multiple lenders.
Your other option is to get assistance from a mortgage broker. Brokers typically work with dozens of different lenders and they can compare each potential loan and provide recommendations that will best suit your needs.
Using a broker will make sure that you get the best possible deal and will also save you a lot of time.
Not knowing how much you can afford
Your home-buying budget depends on two things: your deposit and your borrowing power, also known as borrowing capacity.
Your borrowing power depends on several factors, but the two main things that affect how much you can borrow are your income and your expenses.
There are plenty of calculators that you can use to see how much you can borrow, and they will give you an idea of your potential budget.
However, these should be used as a guide only. Online calculators are not as accurate as the calculators that brokers and banks will use when they are assessing your borrowing capacity.
For example, let’s say you are a couple applying for a loan with a combined income of $140,000 and no credit cards.
Using one major banks online calculator it says you can borrow $620,000.
But the broker calculator – the one that we use when preparing your home loan application – gives a maximum borrowing limit of $740,000.
That’s a $120,000 difference!
You can use an online calculator to get a general indication of how much home you can afford, but if you’re ready to start seriously looking for a home then speak with a mortgage broker.
They can do an in-depth review of your personal financial circumstances and give you a more accurate indication of your borrowing capacity.
Getting your home loan declined
Getting your home loan rejected is much more common today than it was in the past. In 2019 a report showed that 4 in 10 home loans were being rejected by the banks.
Your home loan could be rejected for a number of reasons, such as problems with your credit file, changes in credit criteria or a high number of loan applications.
But there’s one other big issue that could affect your ability to get a loan that’s specific to Nurses: your income.
Due to the nature of the profession, your income situation is more complicated than most. Many Nurses receive a significant portion of their income from overtime and fringe benefits such as meal allowances, untaxed payments to their home loan, or additional contributions to superannuation.
Some banks and lenders will not take these additional sources into account, which can greatly reduce your borrowing capacity or cause them to decline your home loan application.
To make sure you have the best chance of getting your home loan approved, I recommend that you do the following:
- Check your Credit File. At Hunter Galloway we provide a free credit file check to our clients. This report shows all active (and closed) credit cards and loans to make sure this is covered on the loan application.
- Double Check any outstanding credit cards limits. We use a service called BankStatments that will connect with your existing Internet Banking and provide up to date credit limits, again making sure no information is lost and maximising your chances of approval.
- Clean up your bank accounts. Unfortunately, this is something only you can do. If you are paid into multiple bank accounts or have a bunch of different credit cards, try to consolidate them using a balance transfer, or simply close them down.
- Apply for your home loan through a mortgage broker. If you apply directly with a bank, they might make mistakes when assessing your income which could cause your application to be rejected. A mortgage broker can negotiate with the lenders to explain your income situation and make sure you have the best chance of success.
Underestimating the costs of buying a house
There are a lot of hidden fees that are part of the home-buying process, and these costs add up to a pretty significant amount.
If you fail to take these into account when you are buying your home, then you will cause yourself a lot of unnecessary stress. Most of these fees need to be paid upfront, so you need to make sure you include these in your budget.
These additional costs include
- Lenders Mortgage Insurance.
- Costs of Borrowing (Home Loans).
- Government Fees
- Stamp Duty
- Council & Water Rates.
- Strata (Body corporate) Fees.
- Home & Contents Insurance.
- Legal Costs (Solicitor/Conveyancer Fees).
- Building & Pest Reports.
- Moving + Connection Costs.
As an example, if you were buying a $500,000 home in Brisbane, you could pay an additional $16,000 in additional costs.
Make sure to include the additional costs of buying a home in your budget. I’d recommend reading this article here which outlines all 16 hidden costs you’ll likely face as a new homebuyer.
Bonus for first-home buyers: Not getting a pre-approval
The number one mistake we see from first homebuyers, including Nurses, is starting to look for a home without a pre-approval.
A pre-approval is an indication from a lender that they are willing to approve your loan when you find the right property.
Without one, you could miss out on your dream home. A pre-approval allows you to be confident about your budget and your ability to get a home loan once you sign a contract of sale.
If you’re putting an offer on a home, a pre-approval allows you to make a stronger offer with shorter finance terms. This can make all the difference in whether your offer gets accepted or not.
If you’re planning on buying a home at auction, pre-approvals are even more important. If you are the successful bidder at an auction, your bid is unconditional. There’s no cooling-off period in most states, and you can’t make your bid subject to finance. So if you can’t get approved for a home loan, you will forfeit your deposit. Even worse, the sellers are allowed to claim the cost of re-listing the property and any difference in the final sale price and the price you bid at auction.
Make sure you get pre-approved before you start looking for a property. Your pre-approval will be valid for between 90 and 110 days, which gives you plenty of time to find a home that you like.
A word of warning, though: not all pre-approvals are created equally. Some lenders have started giving on-the-spot pre-approvals. While this sounds like a good idea in principle, these pre-approvals are automated and they are not assessed by the lender’s credit department. This can cause issues down the track, as you have a higher chance of getting your loan declined when you apply for your home loan.
The best way to make sure you have a reliable pre-approval is to work with a mortgage broker. They know which banks use system-generated pre-approvals, and which ones complete a full assessment.
How do you find more information about these specials?
Hunter Galloway is an Award Winning Mortgage Broker based in Brisbane, but help Nurses and Midwife’s across Australia.
Ready to take the next step toward buying?
Our team at Hunter Galloway is here to help you determine the best Nurse Home Loan options available to you.
Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please call us on 1300 088 065 or book a free assessment online to see how we can help.
