A home loan is the biggest financial commitment the majority of people will ever make during their lifetime. Such a commitment requires careful and thorough planning, but with the right resources and proper preparation, you shouldn’t need to worry. Here are a few tips to simplify the home loan application process.
Get your credit report in order
Before anything, you will need to make sure that your finances are in order. Sit down and assess your credit report – this includes your personal history of all your credit accounts (cards, loans, mobile phone plans etc.), and all their associated repayment histories. These are the first things that your lender will be looking at when you apply for a home loan.
Dispute any mistakes in your credit file
Misinformation and discrepancies will hurt your credit score and may cause your application to be denied, so consider speaking to a credit professional to help you dispute these issues.
If it’s late, pay it off
Mortgage lenders will be assessing your ability to pay off debts on time. So, if you have anything outstanding, pay them off as soon as you can. If for any reason you have recently made a late payment or have or have caught up on any overdue accounts, it is probably a wise idea to wait at least 6 months before applying for a mortgage.
Keep your documents
When applying for a home loan, the more information you can provide, the better your chances of having your mortgage approved. Buy a handy file to store all your documents including:
- Statements of all previous loans and credit cards
- Payslips – last 2 at least
- Tax returns
- PAYG summaries
- Most recent personal bank statement
- Anything else you think is relevant
Home loan deposit size
Lenders always give preference to those who put down larger deposits. Generally, they consider loans for 80% of the property value to be ‘safe’. Keep in mind that they may be willing to stray from their normal lending policy, if you are willing to put down a large deposit. Borrowing less than 80% also means you can also be exempted from the Lenders Mortgage Insurance (a one-off fee that can be quite strict when assessing your mortgage).
If you’d like to find out more about how to prepare for your home loan application, feel free to drop us a line.