The journey of getting your home loan approved can be a rewarding, yet time-consuming process. And while over time, the steps you need to take become more familiar, there's always the waiting period before you find out the news. If you haven't already, engaging with a broker or your financial advisor before you start your building journey can be a beneficial step, as they can provide you with personalised advice that best suits your family's lifestyle. In the meantime, we've gathered three important pieces of advice that you could do to help you get your home loan approved!
Consistency is key
Having a budget set and followed for at least six months will show lenders that you’re able to successfully budget your money and therefore pay the loan repayments. Any big changes to your finances will indicate your budgeting is unstable and make lenders question whether there will be any in the future that will impact your repayments. Changes lenders will look out for could include reworking your budget structure several times, signing up for a new credit card or making large purchases (such as expensive electronics).
Lenders will typically look at the last three to six months of your statement when assessing your application, this means a budget that’s been stuck to for at least six months can help to show the best stability. Furthermore, when going in for your consultation it would be ideal to take a breakdown of your budget with you. This isn’t a must but will help to show lenders how organised you are and the thought you’ve put into where your money’s going. This includes making sure none of your accounts have any or at least minimal overdrawn balances. It can be frustrating when your car insurance sneaks up on you and overdraws your account even though you have money put away for it, so try to set reminders to avoid this happening.
The time has come to throw away your credit cards and close your Afterpay accounts. Credit indicates to lenders that you’re unable to pay certain bills on time or that you enjoy spending outside your means. Unless you’re collecting Frequent Flyer points with Qantas, it’s best to show on your statements that you’re able to spend within your paycheck each week and spend only what you have. Credit in the finance world translates directly to debt, so any owings on your Afterpay or credit cards mean you have debt that would need to be paid off and ultimately would come before the loan repayments. Lenders will also check to see if you’ve paid your credit bills on time, whether this is through a scheduled payment app like Afterpay or directly through a banking institution's credit card, any missed or late payments will create doubt with your lender.
Before you apply for a home loan, it would be ideal to try and pay off any current debts you have incurred or at a bare minimum, ensure you have been consistently committing to repayments over a period of time. It could also be useful to work your repayments into your budget so that you can show your home lending specialist that you are actively aware of your debt and are taking initiative with it. This will have a positive impact on credit checks and help to prove stability.
Only apply for one loan at a time
Although it can be exciting and tempting to apply to the five nearest lenders, this will come up on your credit score and have a negative impact on your statements. This is because applying to multiple lenders can indicate financial stress and eagerness to secure a loan quickly which can be viewed unfavourably to lenders. Lenders also want to feel as if you want their product, so by applying for many products at once it shows that you just want the loan and haven’t researched why their product is best for you. On top of that, applying to the institution you bank with could also do you harm.
A lot of homeowners lend from their bank because it feels safe when in actual fact, their bank is providing them with much higher interest rates than if they had enquired with an external lender. Sometimes your personal bank has great rates for banking, but high rates for lending.
Utilising online tools such as loan calculators may help with comparing different banks so that you can be sure you're getting the best interest rate over the longest portion of your loan. If you’re not in a position to do the research yourself, it’s wise to look into a mortgage broker. Brokers are able to research across all banks and find the best interest rate for you, whilst advising on which ones to apply for and how long to wait in between applications. This will help to prevent applying to either the wrong institution or applying to five at once. Make sure to check if your broker has any partnerships with institutions as this can create bias and impact their final decision.
It’s understandable this process can be overwhelming with the amount of research required, so we’ve collected some generalised tools to help you along the way. Whether you need help picking a mortgage broker, a loan comparison calculator, a masterpost of loan specific calculators or a budgeting tool, we’ve got you covered. At Clarendon Homes, our aim is to make your building process as smooth as possible, so if you need more guidance with how to get your home loan approved, head to your nearest display centre and chat to one of our knowledgeable sales consultants who will be able to provide you with more information.
Please note that the information contained in this blog is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice.