April 30, 2019
In the aftermath of the banking royal commission last year, banks have tightened their lending rules. This has made applying for a home loan even tougher as banks now go through each application with a fine-tooth comb.
Whether you’re a first home buyer or you’re buying your second or third home, it is important to know the things that can impact your mortgage application. Here are five things that could derail your application and make it difficult to secure the finance you need.
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Lack of genuine savings
Banks will want to see at least three months’ worth of genuine savings as evidence of your ability to save money. You may have just received a financial boost from a family member to help with your deposit, but this will not qualify as savings.
Generally, a lender may want you to hold onto this financial gift in your account for at least three months or even more. That said, some lenders will still approve your application if you can prove that you saved at least 5% of the purchase price on your own.
Poor credit history
Missed payments for bills, such as credit card repayments, and other financial debts can have a negative impact on your credit history.
This in turn can cause issues when you apply for a home loan. If you have any outstanding debts, you should work on getting these in order before putting through an application.
You should reduce your credit card limits down to the minimum and pay down your debt one at a time. But don't worry - your mortgage broker can guide you with the steps you need to take to ensure debt does not impact your ability to take out a loan and give you some helpful tips.
Your personal expenses
These days, it’s common for people to spend money using their debit cards but while convenient, it has meant that banks can now track the way you spend your money.
You may not think much about your orders from food delivery services, your gym memberships or subscription services. But how you spend your money can impact on a lender’s decision to lend to you, particularly in the current climate of stricter lending policies. Therefore, it is important to be mindful of your spending habits.
Lack of stability in employment
Lenders like to see that a borrower has stable employment with regular income as it gives them assurance that you will be able to repay the loan.
Switching jobs when you’re buying a property can raise red flags with lenders so reconsider your decision to change until you have a mortgage. As a general rule, you should have held your job for at least six to 12 months.
Incomplete or inaccurate paperwork
Any incomplete details in the paperwork can slow down the process which can be a problem if you need your loan approved as soon as possible. The benefit of seeing a mortgage broker is that they will handle this efficiently on your behalf.
You should also be completely honest with the information you provide in your application. If a lender uncovers any fraud or miscommunication, this can derail your dreams of buying a home and you risk more serious consequences.
Worst still, if your loan has settled, they may order you to repay the entire loan and this may mean refinancing or selling the property.
The Mortgage Choice team in Carnegie are here to help
While banks have become stricter in how they assess loans, you should let that discourage you from applying for a mortgage. Make an appointment to speak us in Carnegie and we'll help ensure that your home loan approval process is as smooth as it can be.
We'll help you go through your ways to ensure your application goes through smoothly. Book a time to chat today on 03 9576 7107 or click on Contact Us at the top of the page.
