Buying a house is a large commitment and one of the biggest financial decisions you’ll ever make. Follow our seven tips to smooth out the home-buying process and get the best possible chance of mortgage success.
1. Don’t lose sight of your debt
Make sure you pay all your bills on time because lenders will always look very closely at your credit file. And they want to feel confident you can manage those home loan repayments.
Additionally, try to reduce any outstanding debts you have – this will help demonstrate that you manage your money responsibly, and will mean any mortgage application you make is more likely to succeed.
2. It’s OK to check your credit score
A lot of people think that checking your credit report can harm your overall score. This isn’t true.
There are three types of checks that can be made on your credit score:
- Checking your own is a ‘soft’ enquiry and won’t affect your score.
- Having your Westminster Finance Broker check your score will also not affect your score as we have ‘soft’ enquiry access to the credit system.
- Giving a lender permission to check your report is classed as a ‘hard’ enquiry and does affect your score. The Australian Securities and Investments Commission (ASIC) suggest an annual personal check, something you are entitled to do for free, to:
- Make sure that your name or date of birth are correct
- See if your address needs updating
- Check if any debt has been listed twice or whether the amounts are correct
- Check whether you have been recorded as missing any repayments
- Check whether someone might have stolen your identity to get credit. It can happen.
If anything isn’t correct – now’s the time to fix it. Have a look at where and how to check your score on ASIC’s Money Smart Website.
3. Keep your documents safe and sound
When you do apply for a loan, the more information you provide, the better your chances of
approval. So keep all the paperwork, things like statements for your loans and any credit cards,
your savings records, as well as payslips and your tax returns.
Accessing your bank statements can be a real pain. There is software that can make this very easy. Talk to your finance broker about this.
4. Work out the features of a home loan that will best suit you
Principal and interest or interest-only? Fixed or variable? When you’re choosing a home loan
it’s important to work out the features that will best suit you – and what each type of loan will
cost you in fees. Your finance broker can help. They can cover off all the different types of loans
available and what you need to know or think about before you apply, such as:
• How to compare home loans
• Principal and interest loans
• Interest-only loans
• Variable, fixed and split rate home loans
• Redraw, offset and line of credit
• Portability
• Construction loans for building or renovating.
5. Don’t make any sudden moves during the buying process
Leaving a corporate job to start your own business or looking for a new workplace can be an
exciting change, but it can affect your ability to borrow when you’re trying to get a home loan.
Starting a new business might mean up and down cash flow at the beginning or that you don’t
have the standard documentation traditional lenders like banks look for to assess your application.
If you are already your own boss, don’t worry – there are alternatives. Because it’s not always
possible to provide all the up-to-date paperwork or proof of standard income required, some
lenders have created what’s called alternative documentation (alt doc) loan that you can
check out.
6. Some savings are more ‘genuine’ than others
Lenders want reassurance you have the ability to save. They know that people who save more
than 5 percent of the purchase price in a savings account, shares or term deposit, are much
more likely to pay back a home loan than people who don’t show they can save. Most look for
what they call genuine savings, so it’s a good idea to put all your spare funds into a separate
savings account and keep the regular contributions coming into it.
7. Research is key
If the banks say ‘no’, don’t give up yet. The good news is there are lenders that look at the big
picture and consider your individual circumstances, rather than reject an application based on a
preset list of rules. So always check.
If you’d like more information talk to us today about how we may be able to put you in touch with
a lender that can help.