There are a lot of choices available when it comes to looking for a home loan, which is great for consumers because increased competition means more products, better service and competitive rates. Today about 42% of home loans are provided by brokers and non-bank lenders – gone are the days of putting on your best suit and visiting your bank manager.

Irrespective of the person or organisation you choose to obtain a home loan for you, make sure they are a Member of the Mortgage Industry Association of Australia (MFAA). MFAA members and accredited mortgage consultants are bound by a strict industry code of practice that ensures the highest standards of business practice when representing you.

Banks these days are called the “traditional” lenders. They offer loans directly or through one of their accredited mortgage brokers. To obtain the loan, you are required to fulfill the bank’s lending criteria. If you obtain the loan through a mortgage broker you do not pay any more (unless you are obtaining an extra service), and you don’t pay a commission —the bank pays this to the broker for bringing your business.

Mortgage managers or non-bank lenders, this group operates in a similar way to the banks, offering their mortgage portfolio to you directly or through their accredited mortgage brokers. The funding for the loan comes from a variety of sources, and the owner of the mortgage is the provider of the funds. They manage the mortgage on behalf of the owner/trustee.

Non-conforming lenders
If you don’t conform to banks’ and/or mortgage managers’ lending criteria due to the inability to substantiate your income source due to being self-employed, having an adverse credit history or poor payment record, then this group is for you. Their mortgages can be obtained directly, or through a broker, but their rates and fees are normally higher than conforming loans. If successful in gaining your business, the broker will also receive a commission from a non-conforming lender.

Mortgage brokers provide a variety of mortgage products, which they obtain for you through the panel of lenders they are accredited with. Essentially they are an agent of their panel of lenders, working with you to get you the most appropriate loan for your circumstances. They work closely with you to prepare the documents for the lender, submit the application, liaise with both parties through the process and answer any questions through to the approval stage of the loan. They offer their service free of charge as they are remunerated by a commission from the lender.

MFAA (Mortgage Finance Association of Australia) member mortgage brokers will be transparent when it comes to providing you with full details about the loan, any upfront or ongoing fees, commissions, and who was on their panel of lenders. In NSW the broker is required by law to provide this information.