Preparing for the day you will get your first home loan approved is an exciting time and the good news is that there are steps you can take to help boost your chances of mortgage approval success.
To help you have the best possible chance of getting your mortgage application approved, try these five tips to prepare for your mortgage application.
1. Understand your credit history
A negative credit rating can impact your ability to get your mortgage application approved by your preferred lender. You can work on improving your credit score by ensuring you pay your utility bills and credit card bills on time – every time. Start about 18 months before you intend to lodge an application for a home loan to help your credit history look its best.
Using a professional mortgage broker is one smart way to help you shop around for great interest rate deals and lenders who may be more flexible than others but before you start that ball rolling,
2. Consolidate other debts
If you have multiple debts, it will impact your ability to repay a mortgage and any potential lender exploring the risks you bring to a home loan application will consider those commitments.
Multiple credit cards could be consolidated – and, if you are smart in how you tackle this, you might even be able to score an interest-free period, or at least a reduced interest rate for a fixed period, when you do roll all your credit debts into one neat debt.
By demonstrating that you understand how to budget and can meet monthly repayments, you have a better chance of having your home loan application approved – and be able to service your new debt each month. If credit cards you do currently have come with high credit limits, consider reducing the amounts a few months before your home loan application. When potential lenders look at your ability to service debt, they look at your credit limits – not necessarily how much you actually owe. If you have cards you no longer use, get rid of them completely.
3. Prove you can Budget Better
Showing a solid savings history, with a proven track record of income coming in and savings being actively managed, proves your sensible attitude to your budgeting needs. Make sure your bank accounts show stability in both earnings and spending, to showcase how you will be able to meet the demands of a large new home loan debt.
4. Prepare your paperwork
Working with a professional mortgage broker does minimise your personal stress about preparing paperwork for banks and lenders but there is still a lot to organise to ensure your mortgage application process runs smoothly. Before you meet with a mortgage broker, start preparing the important paperwork you need for identification and proof of earnings/savings.
The basics for any home loan application include the following, so start gathering your documents now:
- 6 months of bank statements – include ALL bank account
- 3 payslips (for PAYG employees)
- Last two years of lodged tax returns (self-employed or contractor)
- Details of all other loans (have 3 – 6 months statements ready to show repayment
- Credit card account details, including credit limits and 3 months repayment history for all credit cards
5. Match your Expectations with Your Reality
That dream of the perfect house with a beautiful backyard is a popular one but the reality is that first-home buyers may need to start smaller and build up to their perfect property.
Being realistic about your expectations and how your ability to service a home loan can match that is important – even if it might seem boring.
Look at recent sales in the area you have your eye on and talk to an experienced mortgage broker about what’s really achievable, based on your credit history, income and savings. Getting approval for a home loan is a wonderful step towards making your property dreams come true but it’s critical to realise that you do need to work hard and save hard to get closer to living the life you dream about. It is possible. But reality is something you can’t afford to ignore.
For help and support about how to help your home loan application get approved, talk to our home loan finance specialists at Lending Specialists today.