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Boost your chances of home loan approval

Mozo

Monday 09 May 2016

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by downloading a free copy online, because how disappointing will it be being rejected due to a small mistake like an out of date debt that was resolved long ago.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.

You’ve saved the deposit, found the perfect property and are already imagining the ways you’ll furnish your new digs...but wait have you forgotten one important thing? Whether you will actually get approved for a home loan.

These days banks are introducing tighter restrictions around home loan lending, increasing their risk assessment scenarios and judging your ability to repay the loan on a higher interest rate.

So before you apply, read up on the top ways to get your application over the approval line below…

1. Download a free copy of your credit report

Whether it’s an out of date debt that was resolved long ago or an error about your personal information, one of the most disappointing things that could happen when you apply for a loan, is being rejected due to a mistake on your credit report.

It’s easy to avoid this mishap by downloading a free copy of your report online from websites like VedaCheckYourCredit and Experian. If you do find a legitimate red mark against your name make sure you sort it out before applying, by paying down any lingering debt.

2. Show you have genuine savings

If some or all of your deposit comes from things like a cash gift from your family or bumper tax return, it’s important to remember that a home deposit by itself isn’t enough to get you approved for a home loan.

You’ll also need to show the lender that you have been putting money aside into a savings or term deposit account for at least 3 months. This will be an indication to the provider that you have good savings habits and will be able to meet the ongoing repayments.

3. Keep on top of your debt payments

The lender will also want to see that you’re meeting the repayments on your current debt obligations. So before you apply for a home loan, ensure you’re making the full monthly repayment (rather than the minimum) on things like your credit cardcar loan or personal loan.

If you can, consider making extra repayments on these types of credit too, as this will show the lender you’re more than capable of meeting your future home loan repayments.

4. Stick with your current job

Banks want to see that you have financial stability, so hold off on making any career moves before you apply for a loan, as the lender will ask for 3-6 months worth of payslips.

5. Don’t apply for other credit

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 as a riskier borrower if you have too many lines of credit to draw on. Also keep in mind every time you apply for a credit card or personal loan it leaves a mark on your credit report.

6. Be fussy with your home loan choice

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.

For tips on choosing a home loan lender, read our guides.

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