How to Increase Your Chances of Getting Approved For a Home Loan
If you are like most Australians, buying a home means borrowing from a financial institution to finance the purchase. But how can you maximise your chances of being approved for your first home loan? Here are tips to get you on the right track towards homeownership.
If you are seriously considering a property purchase, one of the first steps you should take is simply save as much as possible. Categorizing expenses as essential and extra, and paying with cash only instead of using your credit card are simple things you can do that will have a huge impact on your bank account.
Regardless of your income, the more savings you have the better your position will be when going for the loan. Purchasing property entails putting down significant money on a deposit. If you can put up 20% up front you will also avoid paying Lenders Mortgage Insurance (LMI).
Savings are one of the first things lenders look at. If 20% is too far off, 10% is a good goal to shoot. For those whom even 10% seems far away, all is not lost. A good credit record and proof of steady income can help improve your chances of securing a low deposit loan.
Just be aware that a low deposit up front will generally mean higher payments over the loan term.
Stay the Course
Try not to make any major changes in your life while you are preparing to buy a new home. Major purchases such as a new car will add to your personal debt and decrease the amount you can borrow. Job changes will also be frowned upon.
It’s best to have at least 6 months to a year of steady employment. On the other hand if you don’t have much of a credit history, do your best to maintain a clean credit history. Make your payments on time and don’t default on your bills, even if it means making only the minimum payment on your credit card this month so you can pay the electricity bill in full.
Different lenders have vastly different criteria and offer quite different lending products. It pays to shop around. One lender may give you more, another lender may offer less, and a third might not even offer you a home loan. Besides loan amount, loan structure also matters.
In fact, a large loan amount isn’t always ideal as it also means you’ll have to pay more over time. Since a home loan will last for years, terms, rates, and options that suit you can be just as important as the loan amount.
When it comes to buying a new home, home loans are a necessity. Understand what’s involved, start saving early, and shop around to make sure you get the best deal possible. First Home Owners Centre (FHOC) has an in-house finance team to answer all your financing questions.
Give our friendly representatives a call today.