As interest rates go up and mortgage holders feel the squeeze, have you noticed how much advice is bubbling around about how to pay off that loan a little quicker? Go fortnightly payments instead of monthly; make extra payments while interest rates are still pretty low; shop around for a better deal, put your savings in a linked offset account. But what has been much thinner on the ground lately is advice for those who are still struggling to get into the home-owning business in the first place, amid skyrocketing cost of living, interest rate uncertainty and historically high house prices that continue to rise in certain markets.
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But before we get started with some home loan advice gems, it’s important to recognise that there’s no magic formula here. In fact, because the banks are factoring in the soaring cost of living, interest rate rises and even the prospect of falling property prices, getting that home loan application assessed is perhaps more stressful than ever. There’s absolutely no doubt, however, that doing some or all of the following will definitely give your chances a little kick:
- How’s your spending?
Before even thinking about lodging that application, it’s time to rein in your spending – well in advance. That’s because a big part of what the bank will look at is how you live your life, so for 3 to 6 months before you sign on the application form, think very carefully about how the assessor might interpret your ability to repay the loan in light of your lifestyle.
* Re-think that second takeaway coffee for the day
* Do you need to subscribe to so many streaming services?
* Catch a bus rather than an Uber
* Maintain your credit cards at $0 balance.
- How’s your credit history?
Remember, the bank is going to delve into your financial profile from top to bottom, to answer a simple question: What’s your creditworthiness? There’s nothing more important than your ability to service your debts, so:
* Get a copy of your credit file
* Make sure there’s nothing inaccurate in the report
* Keep at least one credit card or car loan to show you know how to manage it
* Strictly pay all due dates on time.
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- Can you reduce your credit burden?
Even if you’re very good with your credit card spending, don’t forget that the bank will also look at the actual limits on those cards. For instance, if a card has a $5,000 limit, the lender will have to assume that you might at some point ramp up your spending and actually regard that limit as an actual debt burden. And as with tip #1, reduce those limits as much as you can with plenty of time to spare before signing the loan application.
- Don’t switch jobs quite yet
As well as your credit history and debt burden, the bank will also look at your overall character – and a tendency to keep switching jobs will not necessarily be looked at positively because of the risk of unemployment.
* Be able to demonstrate the ability to keep and hold a job
* If you do change jobs, stay in the same industry with largely the same role and salary.
Generally, you’ll need to have at least a 20% deposit to get that loan without mortgage insurance – but how you got your hands on it is also vital. Clear documentation of your ability to diligently save will demonstrate not only that you’re a low risk borrower, but that in fact you’re the ideal person for them to go into business with.
- Apply for one loan at a time
While you might think application-bombing simply ramps up your chances of getting that single approval you’re hoping for, be aware that this sort of activity will actually show on your credit report. So while it may seem counterintuitive to play a cool hand, not appearing to be desperate may actually be another tick in your favour.
- Be honest
We’ve left this tip for last, but it may actually be the most important one. Why’s that? Because if you accidentally-on-purpose forget to tell them about a little debt here and another one there, assume that non-disclosure is probably the easiest way to tell a bank not only that you’re trying to hide your true profile, but you’re also not the sort of character they want to put their money on.
Yes, it’s no exaggeration that getting into the property market has arguably never been tougher – especially for a first home buyer. But if you put a little forethought into how you’ll appear on those application papers, you won’t just maximise your chances of the answer you’re hoping for but hopefully gain access to the most favourable loan products on the market.
Contact OurTop10 today as your go to resource for home buyers.