Finding your dream property can be tricky, but it can be just as hard finding the most suitable home loan too.
Getting approval from a lender can be a stressful process, particularly if you’ve already made an offer on a home and time is of the essence.
Once your details are in the hands of a lender there’s not much you can do while your application is being assessed, but before you hand in the paperwork there are some things you can do to improve your chances of getting your application accepted.
- Do your own credit check
Don’t leave things to chance. It’s best to find out if there are any red flags against your name before a lender does by conducting your own credit check.
You can access your credit history for free from Equifax or Experian.
Look for any errors on your file such as an old credit card that is no longer in use, or be prepared to explain any issues when you make your application.
- Consolidate and pay down debts
Lenders may be wary of approving a home loan for someone who has multiple debts in their name.
If you have multiple credit cards or loans then aim to reduce these as much as possible before applying for a loan.
Keep in mind that even if you have a credit card you don’t use, it can be seen as a liability.
- Follow good savings habits
Banks will want to see that you have the ability to save before approving you for a home loan to demonstrate that you will be able to make repayments.
Saving is a good habit to get into as soon as you can though, so you can save for that 20% deposit you’re going to need to make your home purchase (or possibly less if you choose to use LMI).
- Limit new expenses
If you’re looking at buying a home in the near future then it’s probably not a good time to sign up to a new mobile phone plan, or take a car loan out.
You want to limit your financial commitments as much as you can to keep your debt-to-income ratio low. Limiting new financial commitments will also help you reach your savings goals quicker.
- Shop around before applying
You should definitely take your time shopping around and comparing different home loans, but don’t apply for a loan until you’re ready.
Each time you apply for a loan it will be recorded on your credit report, and too many applications (or any rejections) may signal a red flag to your lender.