5 ways to improve your chances of being approved for a home loan
It’s not uncommon to feel like you’re on an emotional rollercoaster when applying for a home loan, regardless of whether it’s your first time or you’ve purchased in the past.
When so much as one small error in your application can cost you the chance to own a home you can call yours, it comes as little surprise that most buyers feel a sense of overwhelming dread and experience sleep deprivation at times throughout the process. But we don’t want that for you!
While we can’t change the application process, our team at Kitty & Miles can offer you a helping hand and a wealth of knowledge on your journey to home ownership. But before you delve any further into filling out those forms on your own, here are 5 super handy tips to making your application a success!
Organise your documents
Completing a home loan application isn’t just logging into an online portal, entering a few details, and waiting a few minutes for an outcome. Oh, how I wish – it’s an event, there are no two ways about it!
One of the biggest pitfalls in any home loan application is getting all the necessary documentation in order ahead of time, and of course, filled in with complete accuracy.
And when it comes time to provide the requested material, do not withhold information deliberately, as this may be seen as fraudulent. Be honest, collect all the paperwork ahead of time, or keep a list of where to find the documents in your online hubs, so that when the time comes to collect the evidence of your financials, you’re not wasting a second getting lost in convoluted banking portals.
If you’re unsure about what to include in your application, it’s always best to speak to a trusted mortgage broker who can ensure you’ve included all the right stuff.
A mortgage broker is your home loan advocate and will ensure everything you’re about to submit will get you across the line. Don’t underestimate the power of a mortgage broker’s knowledge and relationships with lenders.
Show your savings history
Banks and lenders will need to know that you can be relied upon to pay back the money you’re loaned. One way they do this is to assess your current savings and savings track record.
While it may be nice to have a lump sum deposited into your bank account from a generous family member prior to your application to help fill out your savings, this can actually work against you when applying for a loan, as it doesn’t demonstrate your ability to save money or pay back money over time.
Lenders want to see a solid saving capability, so they know you will be able to pay back your loan within the agreed period. Keep tabs on your savings, adopt smart spending habits, and be ready for your bank statements to be inspected closely when the time comes.
Ensure your deposit meets the lender’s threshold
Every lender has strict conditions that borrowers need to abide by, including the loan-to-value ratio (LVR).
Most commonly, homeowner hopefuls need to be ready to fork up 20% of the home’s total value, meaning the lender covers the other 80% (LVR). So if you were looking at an investment property worth $600,000, you would need to pay $120,000 from your own money, with the lender covering the remaining $480,000. This doesn’t include stamp duty or legal costs though, so keep this in mind.
That said, there are government schemes available that accept a 5% deposit for first-time buyers who meet the criteria. Keep an eye on government announcements in this area (especially around election time!).
Consider your credit score
Part of your financial evaluation includes a third-party assessment of how responsible you are as a buyer. How many loans have you applied for in the past? How many have you been offered? How long did it take you to pay them off?
Did you know you can check your credit score online with little to no fuss? Make sure you do this before approaching your lender so you can be prepared for any questions they may have along the way.
Remember, there are always ways to improve your credit score, so if you have a history of a few unpaid bills here and there, you can work on this together with your mortgage broker for a better outcome.
Proof of regular employment
Most lenders need to see that the borrower has worked steadily in a job for 6 to 12 months prior to application.
Self-employed individuals typically need to show financials from the last 2 years of trade, so be sure to have your taxes and financials done professionally in the lead up to your application.
While these tips may seem straightforward, they’re actually imperative to getting a good head start on your home loan application. Remember, it is best to be in contact with a broker in the lead-up to submitting the documentation so you don’t forget to include any of the important details that could cost you a home loan.
Still a bit stressed and confused? It’s all good and we totally understand! Give us a call or shoot us an email here at Kitty & Miles, and we’ll bring the zen to you. We have a handful of top notch mortgage brokers who can assist with the loan process and save your sanity too.