Questions to Ask a Mortgage Broker as a First Time Home Buyer

First-time home buyers need to ask their mortgage brokers the right questions when dealing with home loans. A mortgage broker's role as a valuable go-between helps deal with banks and other lenders to find a home loan that matches your needs. Making such a big financial commitment means you should understand everything before signing any paperwork.

First home buyers can benefit substantially from mortgage brokers who help them understand their borrowing power. These brokers find suitable loans and negotiate with lenders on the buyer's behalf. They work with several lenders who offer different home loan products to match each buyer's situation perfectly. Smart first-time buyers should prepare specific questions about loan options, interest rates and application processes before meeting their broker. They should also understand the broker's payment structure and experience with first-time buyers to ensure they work with someone focused on their needs.

What to Know Before Choosing a Mortgage Broker

Choosing the right mortgage broker takes more than just reading good reviews. First-time home buyers should do their homework to find a qualified professional who puts their interests first.

Check if the broker is licensed and accredited

You need to verify your broker's credentials before working with them. Australian law requires every mortgage broker to have an Australian Credit License (ACL) or work under someone else's license. This license means they must follow the National Consumer Credit Protection Act and recommend products based on your financial needs, not their own interests.

Here's how you can check a broker's credentials:

Look up their name in ASIC's Professional Registers as a Credit Representative or Credit Licensee
Ask to see their Certificate IV in Financial Services (Mortgage and Finance) - the basic qualification they need
Make sure they're part of an ASIC-approved dispute resolution scheme like AFCA
Check their membership with industry groups like MFAA (Mortgage & Finance Association of Australia) or FBAA (Finance Brokers Association of Australia)

Note that working with an unlicensed broker puts you at risk - they're breaking the law if they're not in ASIC's registers.

Understand how brokers are paid

Most brokers get paid through lender commissions rather than charging clients directly. Their payment comes in two main forms:

Upfront commissions - These one-time payments come when a loan settles.
Trail commissions - These ongoing payments last throughout the loan's life and are based on your remaining balance. They stop if you refinance or pay off the loan.

Brokers might also get volume-based bonuses for hitting settlement targets with certain lenders, which could create conflicts of interest. "Broker clubs" or loyalty programs reward them based on how much business they send to specific lenders.

The best brokers are upfront about their commission arrangements and any fees, even though lenders pay them.

Ask about their experience with first-home buyers

You'll want a broker who knows the ins and outs of first-time buying. The right experience can make a big difference since first home buying comes with its own challenges and opportunities.

A broker who's great with first-time buyers will have:

A full understanding of first home buyer grants and schemes
Solutions for common first-buyer challenges
Knowledge of lenders who welcome new property market buyers
The ability to explain complex ideas simply

Ask them directly about their track record with first home buyers during your first meeting. Get examples of how they've helped others like you. The best brokers keep you updated throughout your application without you having to chase them down.

Taking time to check these three areas will help you find a broker who can guide you through your first home purchase effectively.

Questions to Ask About Loan Options

You need to understand loan options before getting your first mortgage. Make sure to check your broker's credentials and learn about the financing solutions they offer.

What types of loans do you recommend and why?

The sheer number of loan options can overwhelm first-time buyers. Your broker should explain different loan types and suggest ones that match your situation. Let them tell you the pros and cons of:

Fixed-rate loans - These keep the same interest rate for a set period (typically 1-5 years). You'll know exactly what to pay, but might face limits on extra repayments.
Variable rate loans - The interest rates change with the market. These loans usually come with more features, like offset accounts and redraw facilities.
Split loans - Your loan gets divided into fixed and variable portions. This gives you certainty and flexibility.
Principal and interest loans - You build equity right away by paying both the loan amount and interest.
Interest-only loans - The initial payments stay lower since you only pay interest for a set time. The total interest costs run higher, though.

Ask which option fits your situation as a first-time buyer best. Good brokers base their suggestions on your income stability, financial goals, and risk comfort level rather than chasing the highest commission.

How many lenders are on your panel?

Your loan options depend on how many lenders your broker can access. Most mortgage brokers work with 23 different lenders through their aggregator and settle loans with 8 of them regularly. Some aggregators connect with 15-40 lenders, so you can access thousands of loan products.

The key question to ask: "How many lenders can you work with, and what kinds are they?" This shows if your broker can really shop around for good rates or has limited choices.

Do you offer loans from both banks and non-bank lenders?

Most people get their mortgages from major banks. Non-bank lenders offer great alternatives, though, especially for first-time buyers who struggle with strict bank rules.

Non-bank lenders are financial institutions that:

Do not hold an Australian Banking License
Are not authorised deposit-taking institutions (ADIs)
ASIC regulates them instead of APRA

These lenders often match bank interest rates and offer more flexible criteria. They might have simple loans with fewer features or full-feature loans with offset accounts that work differently from bank offsets.

Ask if your broker works with non-bank lenders and when they might suggest them. The best brokers look at all options based on your needs instead of sticking to major banks.

Your broker's ability to access and analyse loans from many lenders determines their advice quality. These targeted questions help you figure out if they can find the right loan for your first home.

Understanding Loan Costs and Features

First-time home buyers need to learn about loan costs and features that can substantially affect their mortgage experience. The right questions about everything in your loan can save you thousands of dollars throughout the term.

What is the interest rate and comparison rate?

Your yearly percentage charged on borrowed funds creates the interest rate, but this doesn't show all loan costs. The comparison rate has both the interest rate and specific fees linked to your home loan.

This rate shows you the true cost of a loan and lets you match different options more accurately. A comparison rate usually exceeds the advertised interest rate because it combines extra expenses such as:

Application and establishment fees
Ongoing account-keeping charges
Settlement fees
Exit or discharge fees

Australian lenders calculate comparison rates with the same formula regulated by the National Credit Code. Note that comparison rates exclude optional features, government fees, late payment charges, and Lenders Mortgage Insurance.

What fees are involved in the loan?

Mortgage fees come in three categories and typically cost between 1-3% of your loan amount:

Upfront fees - Charges during the loan application include application fees, valuation fees, settlement fees, and legal costs.
Ongoing fees - Monthly service fees, annual package fees, late payment penalties, and feature-specific charges.
Discharge fees - Paying off your loan or refinancing comes with discharge fees.

Can I make extra repayments or access redraw?

Most variable rate mortgages offer a redraw facility that lets you withdraw additional payments made on your home loan. Fixed-rate loans typically don't have this feature until the fixed period ends.

Extra repayments with redraw access give you two benefits - lower interest costs and access to your money when needed. Regular additional payments help you build a substantial redraw balance that reduces your interest obligations and gives you financial flexibility.

Is there an offset account option?

Your offset account works like a transaction account connected to your home loan and reduces interest charges based on the balance you keep.

This setup could help pay off your loan 3 years earlier (assuming a 30-year loan at 5% with a consistent offset balance). Offset accounts give you immediate access to funds while reducing interest payments, unlike redraw facilities.

Variable-rate home loans usually offer offset accounts, though some lenders provide them with selected fixed-rate products. Monthly or annual fees often apply to offset accounts, so check whether your interest savings exceed these costs.

Preparing for the Application Process

Getting the right paperwork is a vital step in your home-buying trip. You can ask your mortgage broker specific questions about the application process to help you through this important phase with confidence.

What documents do I need to provide?

Lenders need detailed documentation to verify your identity and financial situation. You'll need to submit:

Identity verification - Passport, driver's license, or birth certificate
Income evidence - Recent payslips, bank statements showing salary deposits, or a letter from your employer
Financial position details - Assets (properties, vehicles, savings) and liabilities (existing loans, credit cards)
Expense breakdown - Monthly living costs including groceries, utilities, transport, and subscriptions

Self-employed applicants need extra documentation that includes recent personal and business tax returns from the last two years.

How long does loan approval take?

Your approval timeline depends on your circumstances and your lender's efficiency. We followed these stages:

Pre-approval: 1-3 business days (with complete documentation)
Formal application assessment: 3-5 business days
Property valuation: 3-5 business days
Final approval and settlement: 4-6 weeks

The process from application to settlement takes several weeks. This timeline can vary based on your financial situation and property details.

What is the difference between pre-approval and full approval?

Pre-approval (or conditional approval) estimates how much you can borrow based on your financial situation's first review. Sellers see you as a serious buyer, and you can set a realistic budget. Pre-approvals last for 3-6 months.

Full (unconditional) approval happens after you find a specific property. Your lender reviews:

Complete verification of all financial documents
Property valuation to meet the lender's requirements
Final credit department review

Pre-approval doesn't guarantee final approval. Your financial circumstances, negative property valuation, or changes in lender policies can affect your final approval. Ask your mortgage broker about each approval stage's requirements.

First-Time Buyer Considerations

First-time buyers must overcome several financial challenges to purchase a home. A conversation with your mortgage broker about deposits, grants, and insurance will help clear your path to homeownership.

How much deposit do I need?

First-time buyers should save a 20% deposit of the property's value to avoid Lenders Mortgage Insurance. Government initiatives now allow entry into the property market with less money down. The First Home Guarantee helps eligible buyers purchase with just a 5% deposit. Single parents can now buy homes with as little as a 2% deposit through specific schemes.

Your mortgage broker will show you how these lower deposit options impact your borrowing power and future costs.

Do I qualify for any first-home buyer grants?

Many more financial assistance programs help first-time buyers:

The First Home Owner Grant (FHOG)
The First Home Super Saver Scheme lets you use voluntary contributions from any individual financial year, capped at $75,000 in total
Stamp duty exemptions or concessions, depending on your state and the property's value

You must be over 18, an Australian citizen or permanent resident, and never have owned property to qualify. Most grants require you to make the property your principal residence for 6-12 months after purchase.

Will I need to pay Lenders Mortgage Insurance (LMI)?

Lender's Mortgage Insurance protects the lender if you default on repayments. You pay this insurance when borrowing over 80% of the property's value. This one-off, non-refundable premium adds thousands to your upfront costs.

The First Home Guarantee helps eligible buyers purchase with a 5% deposit without LMI. The government acts as your guarantor for up to 15% of the property value under this scheme.

Conclusion

The right questions make your first meeting with a mortgage broker much more productive. You can build trust by learning about their qualifications, payment structure, and working with first-time buyers before diving into financial details.

Your knowledge of different loan types helps you make decisions that match your long-term financial goals instead of settling for the easiest option. Your broker's panel of lenders affects the competitive offers you receive, so it's best to check this early.

Looking beyond interest rates, you should examine comparison rates and fees to understand the real cost of borrowing. Simple features like offset accounts and redraw facilities might not seem important at first, but they can save you thousands over your loan term.

First-time buyers face special challenges but can access many assistance programs. Questions about deposit needs, government grants, and alternatives to Lenders Mortgage Insurance help you find opportunities you might miss otherwise.

Getting a home loan needs patience and preparation. The application process might feel overwhelming, but a qualified mortgage broker will walk you through the paperwork and explain each approval stage clearly.

Buying your first home is one of life's biggest financial commitments. These essential questions help you find not just any mortgage, but one that fits your situation perfectly. A good mortgage broker supports you throughout this experience and turns a potentially stressful process into a manageable step toward owning your home.

If you are considering booking a consultation with a mortgage broker, don’t hesitate to contact our friendly team here at Mason Finance.

FAQs

Q1. What should I look for when choosing a mortgage broker?

When selecting a mortgage broker, ensure they are licensed and accredited, understand how they are compensated, and inquire about their experience with first-time home buyers. A reputable broker should be transparent about their qualifications and fee structure.

Q2. How many lenders does a typical mortgage broker work with?

On average, mortgage brokers are accredited with about 23 different lenders through their aggregator and typically settle loans with 8 different lenders. Some brokers may have access to between 15-40 lenders, providing a wide range of loan options.

Q3. What's the difference between the interest rate and the comparison rate?

The interest rate is the yearly percentage charged on borrowed funds, while the comparison rate includes both the interest rate and certain fees associated with the home loan. The comparison rate gives a more accurate picture of the true cost of a loan.

Q4. How much deposit do I need as a first-time home buyer?

While a 20% deposit is ideal to avoid Lenders Mortgage Insurance, there are government initiatives that allow eligible first-time buyers to purchase with as little as a 5% deposit. Some schemes even enable single parents to buy with just a 2% deposit.

Q5. What documents do I need to provide for a mortgage application?

You'll typically need to provide identity verification (such as a passport or driver's license), income evidence (recent payslips or bank statements), details of your financial position (assets and liabilities), and a breakdown of your monthly expenses. Self-employed applicants may need to provide additional documentation.