Buying a home can be a stressful process, but if you follow these tips, you can make the home loan process smoother and increase your chances of getting the home of your dreams.
1.) History of Saving
Lenders want to see proof you have control of your finances and that you are making efforts to save. Saving on top of your regular living expenses reassures the lenders you will be able to service the mortgage once you have it.
2.) Have a deposit
On top of savings, you need a deposit. An ideal amount is 20% of the value of the property, however, lenders will take less than a 20% deposit and you will need to pay Lenders Mortgage Insurance (LMI).
3.) Show you can afford the repayments
You savings history is one of the ways lenders will see you are capable of living within your means. Having other proof such as your bills can help show what your true living expenses are and how you afford to live on your budget.
4.) Check your credit file
Get a copy of your credit file and check it for any discrepancies. Sometimes the wrong information is put on the wrong file or you might have missed a bill, moved house and it ended up going to debt collectors instead of you and now is on your file. These issues can prevent you from getting a home loan but many of them are relatively simple to get cleared.
Go over your file, know your credit score and if needed do some work to improve it. The higher your credit score, the more options you have for a home loan, including better interest rates.
5.) Get Paperwork Together
Lenders have a list of documentation they want when you apply for a home loan. This includes identifying documents such as a passport, licence or similar. Financial documents including recent pay slips and bank statements, proof of your deposit and any other income or debts you have such as rental properties or credit cards.
6.) Cut unnecessary expenses
The sooner you do this the better. However, at the very least, if you can reduce your credit limit, it will help. For example, if you currently have multiple credit cards, pay them off and reduce the limits. Reducing the limit can increase your borrowing power slightly and make you a more eligible candidate for a home loan.
Go over all your expenses, see which ones you can reduce or get rid of completely and start saving the extra money to increase your deposit.
7.) Have stable employment
Stable employment helps when securing a home loan. Whether you are employed by someone else or self-employed, the income is what the lenders want to see. They want to know you have been there a while and are likely to continue working there as is shows you will be able to service the loan.
Casual workers, recently self-employed and those on might Centrelink have more trouble getting a loan than those who are in stable employment. It is not impossible, it may require some extra steps and documentation though.
8.) Speak with a broker or apply to one lender
When you go to apply for a home make sure you only apply with one. Multiple applications will go on your credit file which reduces your credit score and makes it harder to get a loan.
Using a broker can make this process a lot easier. They can go over your needs, search for home loans which suit your needs, process the paperwork, chase up lenders if needed and make the process smoother and faster for you.
9.) Disclose everything
When you are applying and going through the process of getting a home loan, make sure you disclose everything. Lenders will go through your history and uncover everything. If you have ever had financial issues, if you recently lost your job or if you don’t have as much saved as you said and instead were gifted a large portion of your savings, all these things will come up in the check a lender does on you and work against you if you hide them. Be honest, disclose everything and if you are unsure, ask!
If you’d like to discuss your home loan needs with a broker, you can find your local broker here. .
This article is not to be taken as financial advice. Every applicant’s personal situation will vary. We recommend seeking professional advice for your circumstances. All loans are subject to the normal lending criteria.