Borrowing money from anybody can be an uncomfortable situation, so when it comes to borrowing enough to purchase your dream home, it's no-brainer that you should make yourself look as attractive as possible to your future lender.
Over the last few years, Australia's lenders have tightened the criteria they use to judge a suitable customer and are now very selective about who they will lend to. That means they're looking for customers who are not only low risk, but reliable borrowers.
So, how can you make yourself look as attractive as possible to a potential lender? And how can you prove you are a low-risk, reliable borrower?
Thankfully, there are a couple of simple steps you can take to help yourself appear attractive to a potential lender, including:
Step 1: Make sure you have a clean credit history
One thing all lenders will look at before approving your home loan is your credit history. Lenders get this information from your credit report – a report on how much credit you have, how much you have available, all your applications for credit and even your repayment history on personal loans and bills.
Borrowers with a sound credit history that is not tainted by a series of unpaid bills will have a better chance of getting their home loan approved. Of course, if you have missed a telephone bill or been late with a credit card payment here or there, don't despair. You can get a copy of your credit history from Veda advantage and then work with your various lenders to have any ‘black marks' against your name cleared up.
Step 2: Get your documents in order:
Having all your documents in order before applying for a loan will not only show your lender that you are serious about obtaining finance, but it will also help the whole process to run far more smoothly. So, when applying for a loan, we recommend having the following documents ready:
- Photo ID
- Details of Income – including two recent, consecutive pay slips as well as details of any other income you may receive including rental income, government benefits etc
- Details of assets – including any investments, superannuation funds, vehicles, savings/government accounts etc
- Other expenses – including what you currently pay in rent as well as any other living expenses you may have
- Details of liabilities – including any credit cards or other loans you may currently have
Step 3: Limit your credit applications:
No lender wants to see that you have already applied for 15 different loan with 15 different banks. So, when you are applying for a home loan, aim to get it right the first time and apply for a loan with a lender you can successfully obtain finance through. A professional mortgage broker can step you through your lender options and help you find a product/bank that is both right for your needs and someone you will qualify with.
Step 4: show you have a good savings history:
If you can show a lender that you have a good savings history and have built up a strong deposit over a period of time, they are much more likely to look upon your home loan application favorably. Proof that you can make a regular and consistent savings deposit translates to your likely capability to make your home loan repayments.
If you can follow these steps, you should be able to apply for and obtain your home loan without concern. Of course, buying a home and applying for a loan is one the biggest financial commitments you can make, so make sure you deal with a professional who can step you through the process and help you to make the right decisions for your needs.