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First Home Buyers 2025: Top Questions You Need Answered
226 Plays22 days ago
Think loyalty gets you a better home loan? Think again. In this episode, mortgage broker Jayden Vecchio tackles the top questions first home buyers are asking in 2025—from the truth about pre-approvals to why applying with too many lenders can hurt your credit score. Get straight answers on deposits, defaults, borrowing limits, and how a broker can help you avoid costly mistakes.
Stop guessing about your buying power! Get a FREE personalised home buying assessment with Hunter Galloway. Call 1300 088 065 or visit huntergalloway.com.au
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Transcript
Introduction and Common Questions for First Home Buyers
00:00:00
Speaker
Does my loyalty get me a better home loan? I've got a pre-approval. Does that mean I'm 100% guaranteed to get a home loan? Should I apply for a heap of lenders and wait for one to say yes? Today, I'm going to take you through some of the most common questions I've been asked in the last five years.
00:00:13
Speaker
Hi, my name is Jayden Vecchio. I'm a mortgage broker at Hunter Galloway. And today, i'm going to take you through the most common questions I get asked by first home buyers in 2025. It doesn't matter if you're just starting off or you're halfway through your pre-approval, you're going to love this. So let's jump right in.
00:00:27
Speaker
Welcome to the buying your first home podcast, your personal guide through the Australian housing market. Here we tackle the big questions and the small details that come up when buying your first home.
00:00:38
Speaker
From financial prep to finding the right neighbourhood, we're here to ensure that you've got all the knowledge at your fingertips. So let's take the first step towards unlocking the door to your new home.
Does Loyalty to a Bank Benefit Loan Rates?
00:00:53
Speaker
First question, a bank with the same place forever, does my loyalty actually help me get a better home loan? Straight up, your tenure with a bank doesn't help you get a better rate. It can definitely help with speeding up processing. Say, for example, your salary credits goes into that same bank.
00:01:06
Speaker
They can just look at yeah the statements they have on the bank system, ah approve your salary and not need to get pay slips and stuff. So that's kind of nice, but it doesn't actually help you get a better home loan rate. The home loan rate in Australia is really determined by the amount of deposit you have, the property purchase price, how much loan you need.
00:01:22
Speaker
And they all sort of go into different factors for them to work out, well, Jaden has a, say, 20% deposit. He has a bigger deposit. He's a lower risk than, say, Nathan, who has 5% deposit.
00:01:33
Speaker
Now these rates do change around as well if you have one of the government schemes, you've got a guarantor and there's different structures there. So that's where working with a mortgage broker can help. Interestingly too, different banks have different specials.
00:01:44
Speaker
There's some banks that have cash backs for first home buyers. There's other banks that do lender's mortgage insurance refunds and rebates. Heaps of stuff out there so it does pay to work with a mortgage broker who knows what
What is the 'Loyalty Tax' and How Can You Avoid It?
00:01:54
Speaker
they're doing. At Hunts Galloway, we help homebuyers all across Australia. So if you want a free review, hit us up.
00:01:58
Speaker
If you're an existing customer and you have been with that same bank for a few years, this is definitely where the loyalty doesn't pay. They even have a term for it. It's called loyalty tax. So if you've had your mortgage for more than two years, it does help to have a look around, see how it compares the market.
00:02:11
Speaker
And your broker can potentially call up that bank, say, hey, Mr. Bank, stay competitive. We're going to leave. They'll sometimes pull up their socks. And if not, it could be worth looking at refinancing. Question two,
Is Pre-Approval a Guarantee for a Home Loan?
00:02:20
Speaker
I've got a pre-approval. Does that mean my loan is 100% guaranteed once I find a place?
00:02:24
Speaker
Not quite. Think of a pre-approval as a strong maybe. It's an indication that the bank said, yep, Jaden, we've potentially looked at your pay slips, we've looked at your bank statements, we've looked at your credit file. You look like a pretty good candidate for a home loan, but it's subject to final approval. So they want to double check you're still in that job in two, three months down the road when you found that house. They want to double check as well that the property you're buying is suitable because there can be different things. Like if you're buying a studio, say like an apartment with under 50 square meters,
00:02:52
Speaker
Some banks are going to not accept that. Other banks don't really care. If you're buying in certain postcodes, there could be restrictions. Even if you're buying in some mining town, some banks want to have a bigger deposit. So all this stuff factors in. That means at the end of the day, the pre-approval is, I guess, not a promise. It's just a strong maybe saying, yep, it all looks good subject to these factors.
00:03:12
Speaker
Question three, should I apply it to a heap of different banks to see who says yes? How does this affect my credit score?
Do Multiple Applications Harm Your Credit Score?
00:03:18
Speaker
Yeah, definitely don't do this. Applying to lots of different banks can impact your credit score. Your credit score is something held by Ilean or Equifax, and it's bit of a determinant of the probability of you defaulting on your home loan or any credit in general, really.
00:03:30
Speaker
Your credit score keeps a permanent history of every credit application you've made in Australia. And if the banks see that, oh, i don't know, Jaden made five different applications to five different banks last week, if you have a whole bunch of applications in a short period, other banks see that as an indicator, say, oh, Jaden's a bit too credit hungry. He may have been knocked back from another bank. We don't want to do business with him.
00:03:50
Speaker
In fact, there's some banks like NAB, for example, if you've done more than three credit inquiries over the last 90 days, it's a pretty strong indication that they're going to say no to you until you settle down and look again.
00:04:01
Speaker
So this is where it's important to work with the broker. We can assess your situation. We can get a read-only version of your credit files to say like, yep, your credit score is good. There's no issues on that. And have a look at, say, pre-approval options to work out which bank is going to be most suitable in your situation. Different things like the amount of deposit you've got, if you're eligible for government schemes, your job, your work history, all that stuff can factor into working out well which bank is going to be the best fit for you.
00:04:23
Speaker
This means you don't need to go out and apply with five different banks to get five different yeses or four no's and a yes. A brokerage job is to help work through the list, work out who's going to most suitable, put forward that recommendation and help you make your decision.
How Do Spending Habits Affect Loan Approval?
00:04:34
Speaker
and Question four, are banks really going to judge my smashed avocado habit or afterpay spending history?
00:04:39
Speaker
It's all right. You can relax on this. Some banks will want to see your last three to six months statements to potentially see your salary credits. They may even look at your spending history, but as long as it sort of fits within a broad set of categories, they're mostly okay.
00:04:52
Speaker
There have been some changes around this. They were pretty uptight on spending history a couple of years ago. Netflix, Dan Murphy spending, OnlyFans. It was all pretty tough, but they definitely have relaxed this to the point where some banks don't even want to see your day-to-day statements.
00:05:06
Speaker
As a broker, we'll generally get those to have a look and go your spending history to discuss and make sure that they fit within the bank's broad categories. If you've had a big holiday recently, for example, lately, and you might have spent a whole bunch of money in Japan or wherever you might have gone, We can explain that to the bank and say, hey, that was a one-off.
00:05:20
Speaker
Matty, say, went overseas for three months, was spending a lot of money. That's going to stop now. He's back at work and things are back to normal. The main thing the bank's concerned about is your ability to make repayments. So your job history, your work, to make sure that's pretty consistent, and your deposit.
00:05:36
Speaker
Having the deposit is really key to be able to unlock the keys that home. Next question, is it possible to get a home loan in Australia with absolutely no deposit?
Are Deposits Always Necessary for Home Loans?
00:05:43
Speaker
Generally no. Without the help of your parents, you usually need some form of deposit.
00:05:47
Speaker
If you have a guarantor, this is where the bank puts part of your loan against your house and part of your loan against your parents' house, allowing you to borrow up to 100%. So say, for example, you're buying a place for a million dollars, you need to borrow $1 million. dollars Normally, if you borrow a million dollars, you have a home worth a million dollars, the bank's not going to give you a loan because they have deposit.
00:06:04
Speaker
security, no equity in that property. So the way it would normally work with a guarantor is they'll give you million dollar loan, but $800,000 of that loan is tied to your property and $200,000 of loan is tied to your parents' property. So the bank, if something goes terribly wrong, they sell you a house first and then they go after parents for what's kind of left or what they need to recover. But in general, using some of the government guarantee schemes, the minimum deposit is 5%. There's also a single parent scheme where you only need a 2% deposit. So there is a bit of savings money required to get into the market.
00:06:32
Speaker
If you're wondering about your eligibility to some of those government schemes, hit us up. We can give you free assessment to see if you're eligible and what is possible with the amount of savings you got today.
Can Small Defaults Affect Loan Approval?
00:06:39
Speaker
What if I have small defaults or shaky credit history? Is buying a home completely off the cards for me? Definitely not.
00:06:44
Speaker
It can make things harder depending on the size of the default and the nature of it. So if it's a $500 telco default or an electricity provider, most banks are completely fine with this as long as you've got a bit of an explanation saying what happened. It was a bit of an administrative issue or something happened, I moved address, I didn't get the bill.
00:07:01
Speaker
They're okay with that as long as it's been paid, all cleared up, that's fine. On the other hand, if it's a credit provider, so you might have had a personal loan, I had a situation where someone had a personal loan with an ex-partner, they broke up, it went into default and it was showing as a $5,000 paid default to say, I think Citibank or something like that. This makes it really difficult for some of the bigger banks and some even the smaller banks who accept your lending.
00:07:22
Speaker
If it's over $1,000, you have a small deposit, it's going to tricky. But it's not all over. There are some non-bank lenders like Pepper, Liberty Money, Latrobe Finance that are okay with defaults. So it means you may need to pay a slightly higher rate for the first couple of years your home loan, but it means you can still get into the market.
00:07:37
Speaker
Again, working with a broker is going to help you navigate this rather than just getting knocked back by a bank and not knowing why. They generally won't tell you the details of why you've been declined. They'll say, sorry, Jaden, we can't give you your home loan at the moment and not say, hey, mate, you've got this unpaid default in your credit file. Just to get it fixed up and we're cool.
00:07:52
Speaker
A broker will help look through that as part of our process. We'll actually sit down and get a reader and then copy your credit file and say, hey, There's this thing on here, there's a judgment or something, or a default to your credit file.
00:08:03
Speaker
What can we do to fix that? Let's go talk to a credit repair agency is another thing. had someone else that had a pretty large default on their credit file. um They spoke to a credit repair agency that took a couple of months, they contested it, went to the bank, and ended up getting it completely removed.
00:08:17
Speaker
So it's not the end of the line. There's definitely a couple of solutions there. um If you're not sure, hit us up. We can have a chat and see it work through solution for you.
How Do Banks Assess Loan Eligibility Over Time?
00:08:24
Speaker
Do banks care about future plans or having kids or changing jobs soon?
00:08:27
Speaker
Yeah. So the bank's assessing your home loan situation today based on a home loan of over 30 years. They're looking at your situation as it is today. As part of the questions, they're going to ask you in that application process, do you see any material changes to your situation over the next two years?
00:08:42
Speaker
So they know you're not going have a crystal ball or know, well you're going to go to Europe in five years or... Things going to change like that. But they do care if you're giving them pay slips, if you're applying for a home loan using income from a job that you're planning on quitting in a month and starting your own business.
00:08:56
Speaker
Because ultimately, that's going to affect your ability to make repayments on the bank's loan. It's the same sort of thing if you're pregnant, you've got a kid. The banks generally want to know that because it's going to change your ability to work, potentially your income situation, your expenses, your household dynamics. So things like that are important to disclose to the banks because it potentially will affect your ability to borrow There are different banks' policies to accommodate this. So with maternity leave or paternity leave, the way that they can work around this is potentially get a return to work letter and say, all right, Jaden, you're going to return to work in December next year at 50% pay. We'll use that income figure to work out your loan repayments today to make sure you can still afford it today and then, which is pretty good workaround.
00:09:34
Speaker
um If you're on workers' cover or there's different pensions as well, there's some banks that are completely fine with that and allow you to use that in. So again, working with the broker here is going to help get the right outcome for the situation and make sure you're not getting over your head because using income that you might have today and then if you're 100% work and then you go back to 0.5 FTE or half the amount of hours, it's going to affect your ability to make those repayments.
How Do Interest Rate Changes Impact Borrowing Capacity?
00:09:58
Speaker
The bank said, I can't borrow as much as I need for the properties I like. What my options? Having a lower borrowing capacity is a pretty common hurdle for a lot of first-time buyers and it can be crazy frustrating. A real common one I see is, you might have spoken to a bank four or five years ago when the interest rates were super low.
00:10:12
Speaker
You'll come back today, through the calculations and be like, well, five years ago you said could borrow $700,000, now you're saving $500,000. What is going on there? That's got to do with the interest rates that have increased and the way the banks will look at the repayment buffer.
00:10:24
Speaker
If you're applying for home loan today, they'll generally apply a 3% buffer at they're going to assume that although the interest rates today are, say, around 6%, they assume that one day over the next 30 years, the rates could get up to, say, 9%. And they want to make sure you can afford those repayments today and in the future.
00:10:38
Speaker
So although one bank might have said you don't have the capacity, it doesn't mean all banks treat your income in the same way. Different banks have different policy around, say, bonus income, using overtime, Boarding income, a couple of banks have changed full recently where they allow you to rent out a bedroom if you're a first home buyer that can help increase your capacity.
00:10:55
Speaker
Credit cards, HECs, personal loans, there's heaps and heaps of stuff here. And this is where it's invaluable to have a consultation with a mortgage broker to work out what your capacity is and how to move things around. Now, i'm not saying you need to overborrow here, but I'm saying different banks' policies can look at your income completely in different lights.
00:11:12
Speaker
And I've seen cases where someone's borrowing capacity could be undershot by over $100,000 because of things like having a $1,000 outstanding hex or a couple of credit card limits that you're not even using. There's obviously a lot of variables to this and that's where hitting us up might be the quickest way to get an answer.
Conclusion and Contact Information for Hunter Galloway
00:11:27
Speaker
Just go to huntergalloway.com.au. We can have a quick look your situation and see what's going to make sense for you. All right, so they're the most common questions I've been asked this year in 2025 from first home buyers. And if you do need help for finance, hit us up at huntergalloway.com.au with a home for home buyers across Australia. All right, until next time, I'll see you guys.