How to improve your chances of getting a home loan

Jun 29, 2022 | Finance, Home Loan

Finding it harder to obtain a home loan? Don’t take it personally. The banking regulators are placing tighter limits on how much banks and other financial institutions can lend. This is largely in an effort to exert some control over Australia’s infamously high housing costs and, more generally, to reduce our historically high level of household debt.

On top of that, the banks themselves are concerned that an increase in interest rates will put more households under financial stress, leading to a rise in missed mortgage repayments.

That said, in a tighter home loan market there are still things you can do to put yourself ahead of the pack.

Be prepared

Your lender will want to know all about your employment, income, assets, liabilities, credit history and more. They will want to see:

    • A steady income, preferably from stable employment. If you run your own business or are self-employed, the bank will want to look into your business finances too. If you’ve just ditched your day job to work on your internet start-up, now may not be the ideal time to apply for a home loan.

       

    • A clean credit history. Your history can go back as far as seven years for serious credit infringements. On the plus side it can contain positive information such as your record of paying bills in full and on time. Get a copy of your credit history to ensure it is correct and work on creating a good history well before you plan to borrow.

       

    • A track record of saving. Show the bank that you have the discipline to regularly save money. This will also help you build a bigger deposit – another plus that will make it easier for the bank to lend to you.

       

    • Low debts. If you have borrowed to buy a luxury car it might be worth trading in the Ferrari for a second-hand Toyota. And try to pay off any other loans as quickly as possible.

       

    • Also, be aware that lenders don’t take into account the actual amount owing on your credit cards but your total limit – i.e. the amount you would owe if you went crazy with your plastic. Cancel any unnecessary cards and reduce the credit limits on others to the level that you genuinely need.

       

    • A budget. Following a budget demonstrates financial responsibility. Keep it realistic so you can stick to it but flexible enough to cope with the odd unexpected event.

       

    • Time to repay. Older borrowers may find that lenders are reluctant to grant a 25-year mortgage to someone with 10 years to go before they retire. However, lenders may look at when and how much superannuation you can access in the future, and your current savings and repayment capacity.

       

    • Honesty. It’s important that you provide full and accurate information to your lender. Remember that they have access to a range of information sources, from your credit history to your payslips and bank statements.

Inside knowledge

Your financial planner can help you get your debt under control, work out a budget and establish a savings plan.

When it comes to borrowing, it’s worth talking to a licensed mortgage broker. Brokers work with many different lenders, know their policies and information requirements, and can guide you through what can be a daunting process.

Book Your
Free Loan Review

Receive a customised review to improve your savings and reduce the amount you are paying.

Related Blog Articles

Avoid a home loan headache

This article provides a guide on how to prepare for, and future proof, your home purchase to ensure you avoid experiencing a home loan headache! It also covers a range of actions that can be taken when experiencing mortgage stress. – Avoid a home loan headache.

read more

Interest repayments: How much interest are you actually paying?

This article illustrates the importance of budgeting, saving and structuring loans to work in your favour, rather than purchasing on credit. It reiterates the importance of professional advice in early adult life to establish good habits and build financial knowledge. – How much interest are you actually paying?

read more

Take control of your mortgage

This article grants advice to people looking for the right mortgage product and then reducing it quickly. It highlights what to look for and what to be aware of. – Take control of your mortgage.

read more

Interest rates: Will they continue to rise?

To control inflation, central banks have responded by tightening monetary policy and lifting interest rates. But the good news is that inflation is likely to ease. – Interest rates: will they continue to rise?

read more

Authorised Credit Representative 383415 of IFBA Pty Ltd.  Australian Credit Licence Number 383415.
Disclaimer   |   Privacy Policy