Mortgages For Recent Immigrants

2011 April 22

Immigrants who have recently moved to Australia can often find it difficult to receive approval for a mortgage. Since you do not have extensive history with income from within the country, the bank will often consider you to be too high of a risk to work with. Thankfully, not all lenders approach the subject in the same way.

Recent immigrants face two primary obstacles that can make it more difficult for them to receive approval for a home loan: a low or absent credit rating and a small or nonexistent deposit.

Your Credit Rating

Credit ratings are national. If you had a good credit rating in the country where you used to live, this information will not be transferred over to Australia. When a lender tries to gain access to your credit history, they will find that the information is lacking, if there is any at all. Most lenders prefer to have a large amount of information to work with. If they don’t have any, they may refuse to work with you at all.

Deposits

This is more of a circumstantial issue, and not all immigrants will have this problem. In many cases, if you only moved to Australia recently, you might not have saved up enough money to make a large deposit on your home loan. It is likely that you already spent a fair amount of your money trying to move to Australia in the first place. You simply may not have the resources.

On the other hand, if you previously owned a house, you are less likely to sell it if you move to another country, and would rather own both homes. Most people use the funds from their previous home to make a down payment on their new home, but immigrants often don’t have this luxury.

Having no down payment, or a small down payment, can have several different effects on how a lender will work with you. Some lenders won’t work with you at all if you can’t make a deposit. Others will charge you a higher interest rate because they consider you to be a higher risk.

In many cases, you will also need to pay for the costs of lender’s insurance. When you make a deposit of 20% or more, the bank has the assurance that they will usually be able to break even if the house is foreclosed and sold by the bank. With a smaller deposit, they don’t have this reassurance. Lender’s insurance compensates the lender if the home is foreclosed. Unfortunately, this means more costs for you.

Mortgage Brokers are Advised

It’s not necessary by any means, but most financial experts would agree that it is a good idea to get in touch with a mortgage broker. In reality, this is true for anybody who is buying a home, but it is especially helpful for people in your situation.

Since it is harder to find a lender who will work with you, a broker dramatically simplifies this process. A broker has access to people in the industry. They know which lenders will work with immigrants, and which won’t. They can speak directly with underwriters and explain your financial situation. They know whether or not a bank offers a fair home loan to people in your circumstances. Since they speak the language, they can interpret the terms of a loan more easily than you can, offering you a level of security that you wouldn’t have otherwise.

Whether or not this is the case in the country that you came from, mortgage brokers in Australia are typically free. They do not work for the lenders, but they receive compensation from them. In some cases you may be required to pay a fee to the broker, but typically this is not necessary.

Advice for Immigrants

There are a few steps that you will need to take in order to obtain a loan from a reputable lender. Before you can fill out any kind of application, you will need an address. In some cases you can use your employer’s address. If you choose to do so, you will need to get permission from your employer. If you have a temporary place of residence, many banks will be willing to use this address as well.

You will also need to set up a bank account. A name, address, employer, and visa status will be necessary in order to accomplish this. Banks are eager to get customers, and it is rarely difficult to set up an account.

Get started on building credit as soon as possible. One of the best ways to accomplish this is by opening up a credit card. Try to use a credit card as though it were your bank account, only buying things that you can afford with the money that you have in the bank. Use your credit card to pay for everything, and pay off the balance every month. This helps you build up credit.

Remember, banks need borrowers in order to earn money. Walking away from a lender never means that you won’t be able to walk back in the next day. As the borrower, you are the one with the power, not the lender.

Learn more about mortgages for immigrants.

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