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…
Whether it’s an out of date debt that was resolved long ago or an error about your personal information, one of the most disappointing things that could happen when you apply for a loan,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 Veda, CheckYourCredit 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.
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.
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 card, car 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.
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.
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.
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.Home loan tips