How do I improve my chances of a Home Loan application being approved?
1. Savings History
If your a first home buyer, saving for your deposit can go along way to demonstrate your genuine ability to meet your mortgage repayments. Your savings will need to make up at least 5% of the property purchase price. Saving for a larger deposit may reduce or eliminate fees like Lenders Mortgage Insurance and the potential to negotiate a more competitive interest rate.
2. Manage your debit
If you purchase items on zero interest free terms, store credit, credit cards or personal loans you have to pay this back. Any credit limit you have is a debt and will be included in your application finances as if they are fully drawn. You can increase your borrowing power by reducing the credit limit on your cards, consolidating your debts and working hard at becoming debt free.
3. Check your Credit Rating
Having late or missed repayments on your debts will negatively impact on your ability to borrow. You want to avoid your loan application from being rejected because of a late bill payment. Any defaults or negative repayment history will be shown on your Credit Report. You can get a FREE Credit Report within 10 working days by submitting an application to one of three National Credit Reporting Bodies.
4. Employment History
Lenders will look at your ability to repay the loan based on your employment history and stability. Lenders prefer borrowers who have full-time employment with their current employer for at least six months and must provide proof of income in the form of payslips or group certificate. Self employed, part-time, casual or contractors are viewed by lenders as having increased risk and borrowers generally fall into a loan category called low doc loan. Low Doc borrowers will need to show additional financial information and and often pay a larger deposit and higher interest rates.
5. Application Frequency
If you are shopping around for a home loan and comparing lenders, be mindful not to submit applications to multiple financial institutions at once, as these will appear on your credit report. Decide on your preferred lender and only submit one application.
When submitting your home loan application it is very important that you disclose all relevant information. If you don’t reveal all credit cards or other debit and this is uncovered by the lender during due diligence, the loan may be declined due to non-disclosure. Be open and upfront with your mortgage broker and disclose everything! Your mortgage broker can deal with any issues and make the loan application more favourable than if you were dealing with a lender directly.