With these expert tips and tricks, you can prepare an A-grade home loan application that will help you secure finance to buy your dream home!
Whether you’re buying your first home, upgrading to larger digs or investing in property as a wealth creation tool, you’ll need to get your finances in order well before you begin browsing the real estate pages of your newspaper.
The state of your finances will play a large role in determining exactly how much you can borrow, because lenders need to be confident that you’re capable of managing debt and that you’ll be able to repay your mortgage.
Andrew Rocks, financial planner and director of financial advisory firm the Announcer Group, offers the following advice to help you ensure that your loan application is on the fast track to approval.
Be a smart saver
When you apply for a mortgage, you want to create confidence in your lender so they view you as a trustworthy loan candidate. Therefore, anything you can do you confirm that you’re honest and reliable will solidify your position with the bank.
“Having a structured savings history will help, showing that you’ve regularly saved over at least a 12 month period – this is just as important as the amount of savings that you’ve accrued,” Rocks says.
“If the lender can see in your bank statements that you’ve been saving $1,000 a month, that creates confidence.”
Check your credit profile
If you’ve been late paying your bills or you’ve ever defaulted on debts – no matter how small – it could come back to bite you when you apply for a home loan.
“A lot of people say no when you ask them if they suspect any possible default, but in the back of their mind, there might be a phone contract or some small issue that they think might cause a problem,” Rocks says.
If you’re not sure how your credit rating will shape up, contact Veda Advantage for a free personal credit report. They can send it to you within 10 days, or you can pay a fee of around $30 to expedite your results.
Minimise your debts
Credit cards and store cards attract high interest rates, so even a small credit card debt of $1,000 can seriously eat into your mortgage borrowing capacity.
“When you’re applying for finance, the lender will do their calculations, not based the outstanding balance on your credit or store card, but [based on] the limit,” Rocks says.
This means that if you have a credit card balance of $3,000 on a card with a credit limit of $10,000, the bank will view this as if it’s a $10,000 debt.
For this reason, Rocks advises you to lower your credit limits to the minimum amount you require before you apply for a loan.
If possible, you should also try and pay off your cards – and then cancel them. Otherwise, Rocks warns, if you pay off the card but don’t cancel it, “the debt is going to climb right back up again”.