Home loan resources

8 ways to boost your chances of loan approval

Must-dos to boost your home loan approval

Voiced by Rebeccah Elley

So, you’ve found the perfect property and are ready to kick off your home loan application. But wait - before you begin there are a few things you need to do to ensure you get your application over the approval line.

First things first, it’s important to check what shape your credit report is in by downloading a free copy online, because how disappointing will it be being rejected due to a small mistake like an out of date debt that was resolved long ago.

Next up you want to show the lender you have genuine savings, as a home deposit by itself is not enough to get you approved for that loan. Keep in mind the lender will want to see at least 3 months’ worth of savings or term deposits statements.

On top of savings, you will also need to show the bank you are managing your current debt, so before you apply for a home loan ensure you are making the full monthly repayment on things like your credit card, car loan or personal loan.

Hate your job? Well unfortunately now is not the time to find a new one as the lender will also want to see 3-6 months’ worth of pay slips. So, hold off before making any career moves before you apply for a loan.

The same goes for taking out any other forms of new credit like a personal loan or credit card as the provider may deem you a riskier borrower if you have too many lines of credit available.

Last but definitely not least, avoid applying for multiple home loans as this again will affect your credit rating negatively.

Instead do your research by using an online comparison tool and narrow down your choice to one home loan that offers a competitive rate, low fees and flexible features too.

Visit mozo.com.au to compare over 550 home loans today.

Getting ready to apply for your first home loan? Run through this checklist first so that your credit profile will be ship shape and you'll have the best chance of getting approved.

Unless you’re fortunate enough to have just won Lotto, you’ll need to get a mortgage from a bank or home loan lender to help you buy your first home. Every bank tends to have its own criteria for lending so for first time buyers it can unsettling not knowing whether you’ll actually get approved. But there are a number of things you can do to shape up and improve your chances of getting your home loan application accepted. They are...

1. Boosting your credit file 

Before applying for a home loan, get a free copy of your credit report from Veda, D&B or Experian. This will allow you to see what lenders see when they review your application. Once you have a copy of your report, check everything for errors and if you spot an issue, notify the company responsible immediately. Sometimes it can be something small like a wrong address or an old credit card account you no longer use but haven’t closed.

2. Having proof of genuine savings 

It’s likely that you’ve been putting cash away each week in order to save up your first home deposit but if you haven’t, and you were planning to rely on a gift, tax refund or grants like the First Home Owners Grant (FHOG), it is time to start saving. These days, most lenders have a mandatory genuine savings policy for anyone who applies for a home loan, especially if you are borrowing 90% of the property value or more. You’ll be required to show at least 3 months of genuine savings. Types of savings considered genuine savings are savings accounts, term deposits and mutual funds.

3. Holding off on career changes 

When applying for a home loan your finances will come under a lot of scrutiny and lenders will want to see that you’ve been in your job for a decent length of time so save the career changes until after you’ve got your mortgage.

You’ll need to supply copies of around 3 - 6 months of your most recent payslips to the bank when you apply.

4. Reducing debts as much as possible 

In addition to saving for that deposit, you’ll also need to show the lender that you’re able to manage your money responsibly. If you have a car loan or credit card, make more than the minimum monthly repayments.

5. Staying up-to-date on all bills 

With the move to positive credit reporting, lenders will know when and how often you make late payments. It's always best to set up a direct debit for utilities and credit card payments and when you can top up with an extra repayment during the month.

6. Keeping other applications to a minimum 

Every application for credit goes on your file (including mobile phones) so in the months before you apply for your home loan, hold off on getting a new phone, TVs or any kind of store card until after your mortgage is secure.

7. Breaking with past relationships 

If you had joint accounts with an ex and never got around to getting your name removed from the account, now is the time. You don’t want their credit history affecting your application.

This also applies to businesses you may have dealt with in the past but you haven’t bothered to close off the account. Keeping your credit file as clean as possible

8. Living within your means 

Good money management skills are a must-have when owning your own property. You might be required to show copies of recent bank statements to prospective lenders to demonstrate that you can live easily within your budget.

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