The banks look at a lot of factors when deciding how much you can borrow. Some obvious, but some not so obvious. Below are some points that will help you get your home loan, once you find that perfect property. In Short:
- Good riddance to credit cards and BNPL
- Get a copy of your credit report (from us)
- Don't spend like a loose cannon
- Consistent employment
- Don't make numerous applications for credit
- Talk to a mortgage broker
Credit Card Limits - Tip 1 is to reduce or eliminate your credit card limits. Banks do not necessarily look at your credit card debt, as much as your credit card limits. "Did you know that a $10,000 credit card limit reduces your borrowing capacity by approximately $60,000?" It doesn't matter if you pay it every month, or even if it is just sitting there, unused. Banks know all to well the temptation that comes with owning a credit card, and they essentially don't trust anyone. So what ever your credit card limits are, multiply it be 6, and that's how much your borrowing capacity will be reduced. Get rid of your credit cards!
Get a copy of your credit file - Make sure that all of your outstanding debts are paid and up to date. Talk to us, we can provide you with a FREE credit report, as you may even have some debts outstanding that you didn't know about. You'd be surprised at how many clients we have that have at least one thing on their credit report that came unexpected. Get a copy, and make sure it is squeaky clean before you apply, we can help you with this.
Set a budget and control your spending - Particularly in the months leading up to the loan, it is really important to have a clear budget. You will need to provide your bank account statements to the lender. We aren't saying stop enjoying your life. Just ensure that you are living within your means and saving money each month. "You don't want to appear like a loose cannon, so reel in the spending" The last thing a lender wants to see is regular bad spending behaviour. The key word there is regular. A few nights out, a couple of Menulogs, and a cheeky punt on the state of origin won't put you in the bad books. But . . . 10 deposits a month into your Sportsbet app, regular online shopping sprees, numerous buy now pay later accounts, and 5 nights a week transactions at your local watering hole will drastically reduce your borrowing capacity. A good rule of thumb, if you wouldn't show your statement to your mum . . . you should shape it up before showing it to a bank.
Steady Employment - If you have been tossing up whether to change careers, go part-time, start your own business, or any kind of job change - be aware that it may affect your application. If you are thinking about any of the above scenarios with regards to employment, it is really important to talk to your broker before you make your decision. Especially if you are hoping to buy a property or refinance your house. I would always be the first to encourage clients to follow their dreams when it comes to their career, but it's always best to know what effect it will have on your chances of getting a home loan.
Keep other applications to a minimum - Your credit history shows how many applications for credit you have made in the past. A few applications here and there are fine, and have little effect on your credit score. But 6 applications for different credit cards, 3 buy now pay later applications, 4 car loan applications, and 6 personal loan applications will severely dampen you hopes of a home loan. Just to be clear, it is the application that counts, regardless if you are approved or declined. So if you are thinking of applying for a personal loan, car loan, or even credit card - talk to your mortgage broker about the effect it may have on your home loan hopes.
Talk to a mortgage broker "All of these points have one common factor, talk to your mortgage broker." We live and breath this stuff. A mortgage broker sits in your corner when you go to the big bank for a loan. We work hard to find the right lender for you, at no extra cost to you. Even after you have the loan, we'll review it every year to make sure you are paying the most competitive rates, and to ensure the loan suits your financial objectives. Talk to us today! We are a really approachable bunch, and we'd love to meet you.
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