If you wanted to run a half marathon there would be some steps you would take to prepare yourself, right? After all it’s is important to you!
Applying for a home loan, while not nearly as fun, has the same rigorous process and if you are prepared 3 months before hand, this can really help!
Let’s look at how to best prepare yourself to apply for a new home loan
- BANK STATEMENTS – if you are looking for a home loan with a nice low rate below 2.5% you will need to provide the lender with 90 days of bank statements for your salary account and the account your everyday expenses come from. This is how the lender will verify your living expenses, so with this in mind you need to make sure your accounts are clean and your discretionary spending is curbed coming up to this application.
During this period, you should. Reduce spending on food delivery services such as UBER, Deliveroo etc.
Rethink any gambling, especially on apps such as sportsbet and TAB online, while it is ok to place a bet on Melbourne Cup day each year, it’s not favourable if you wanted to apply for a home loan in the near future. Gambling is regarded as a red flag by most lenders.
- BUY NOW PAY LATER SERVICES – this is still credit & it’s not something that leaves no footprint, they will show on your credit score and the limit of each. AfterPay & ZipPay facilities will be taken into consideration when your broker performs your calculator for serviceability.
- THE LITTLE THINGS – So you love to buy vintage records? That’s fine but maybe you should take a little break in the lead up to your loan application, any non-essential should be stopped right now. .
*Note, NOT all banks will ask for statements, if this is something you don’t want to disclose that’s ok contact your broker and let them know.
After the Covid pandemic hit, the Government released some special previsions which allowed people who have been adversely affected by Covid-19 to take out $10k in the last financial year and $10k the next financial year. This was designed for people who needed these funds to survive, not to boost up savings. The issue with this is, the banks are coming to us and saying “your client has taken this out due to financial difficulty, and then we are left trying to prove income stability.
This was not super clear when the government released this information and if this is something you did, don’t worry we will do everything we can to help your loan approval.
There has been some concern that if you have been affected by COVID and are on JobKeeper you will find it difficult to get a home loan. This is not the case, we just need to prove to the lender your income is stable and you have definite hours to return to. Same with business owners who are being paid JobKeeper payments, this can be very positive and we can work around this.
You need to be able to prove you have held 5-10% savings in a bank account for at least 3 months. For more on genuine savings see our previous blog post: genuine Savings explained:https://prosperfinance.com.au/2018/04/24/the-power-of-compounding-2/
This is a great time to look at your current smaller debts and consider if you are
1. Paying too much interest
2. Drowning in admin/fees due to your 7 credit cards that are all under $5k.
Consider you roll these into one easy to manage personal loan at a rate of 8%, here you are guaranteed to actually pay that debt down and you can also reduce your monthly repayments which can help with your overall ability to service the loan.
CURRENT DEBT CONDUCT
DON’T BE LATE!! Simple, if your credit card repayment is more than 30 days late this is shown on your credit score. This is a personal pet hate for me, it’s so hard to explain why you can’t pay on time, the banks don’t like it and often it’s just an admin issue.
This is just the tip of the iceberg when it comes to applying for a home loan, which is why using a finance broker is such a valuable service. Our job is to help you get the home of your dreams and protect you whilst doing it.
Please feel free to call us anytime for an obligation free chat if you want more info and need some help to get yourself ready!