February 19, 2015
Borrowing money to purchase a home is a big financial commitment for you and a risk for your lender.
Australian lenders have selection criteria you need to meet before they will loan monies. They are looking for customers who are not only low risk but who can also prove they are reliable in paying back loans.
When you are thinking of purchasing your dream home, there are four simple tips you may like to employ to make yourself appear more attractive to future lenders.
Step 1: Make sure you have a clean credit history
All lenders will obtain your credit history report. Not only do they look at how much money you have in the bank and what other loans you may have, they also look at the way in which you have paid your bills, your rent and your repayment history on any previous loans.
This report also looks at how many applications for credit you have had. Too many loan applications on your credit file can have an adverse effect on your credit score which can make it harder to obtain finance.
If you feel you may have the odd black mark against your name you can work with the institutions to which you have owed monies to remove these from your credit history.
Borrowers with a clean credit history have the best chance of getting their home loan approved.
Step 2: Get your documents in order:
Being organised and having all your documents in order prior to applying for a loan will show your lender that you are serious about obtaining finance.
The documents required for the majority of lenders are:
- 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
The idea of shopping around is a good idea for most big financial decisions, however applying for multiple loans is not.
Lenders become concerned on how reliable you are in meeting your repayments if you have applied for loans with many different lenders, or if you have been declined by other institutions.
Using a mortgage broker allows you to still shop around. After consulting with your broker, you will gain the knowledge of each loan product (on their panel) that you qualify for and how it will help you meet your financial goals.
Your broker will then apply for one loan with one lender for you, removing the stress and worry of all the paperwork.
Step 4: Show you have a good savings history:
Demonstrating to your lender that you have built up a good deposit over a period of time will work in your favour. By showing that you make consistent and regular deposits into your savings account will demonstrate this but so will showing that you make all your rental commitments.
Some clients have a good size deposit but unfortunately as they received the money in a lump sum from maybe a family member as a gift, they are unable to demonstrate a good saving history to their potential lender, and risk their loan application being declined.
By following these steps, you should be able to apply for and obtain your home loan without concern.
At Mortgage Choice in Mudgeeraba on the Gold Coast we understand buying a home and applying for a home loan is one the biggest financial commitments you can make.
Let us step you through the process and help you to make the right decisions for your needs. Call on 5559 2568 or send an email on email@example.com to make an appointment to discuss your financial plans.