So, you’ve fallen in love with a property, and you want it to be yours, like, yesterday. You already know how you’re going to renovate the lounge, decorate the bedrooms and revamp the garden. In your mind, you’ve moved in.
Unfortunately, it’s not that simple. You need to go through the home loan application process before you can call your chosen property home. Armed with the right advice and a knowledgeable and experienced partner at your side, the bond application process can be made a whole lot easier and less time-consuming.
Andrea Tucker, Director of digital mortgage brokering service MortgageMe, shares expert tips on getting a home loan for that dream home.
1. Ensure a good credit score
One of the first things banks look at before approving a loan is your credit score. It’s best to ensure your credit score is at least 600, with 650 and above being ideal. Your credit score takes into account how often you apply for credit, whether you’re making your debt repayments on time, and whether you have any defaults or credit infringements against your name.
Tucker advises that you go out of your way to build a good credit history before buying a house. “You can do this by opening a cell phone account, using store credit or credit cards, or applying for car financing, and being diligent about meeting your monthly payment deadlines. It’s a good idea to check your current credit record at no cost, once a year, through any registered credit bureau.” If you’ve recently gone through some tough financial times and you had defaulted on payments, banks may not look favourably on this behaviour, and this will impact your application. Just be aware of this and time your house hunting journey accordingly.
2. Calculate your affordability
Before providing you with a loan, banks perform an affordability assessment to ensure you can make the monthly payments. They will look at your total monthly income before tax and expenses have come off, and then your net income, minus your monthly expenses. They take into account other loans, vehicle finance, credit card payments, and your domestic expenditure.
Before submitting an application, do your own affordability assessment. MortgageMe offers a simple, easy to use calculator called a bond certificate. “Simply upload your recent bank statements showing your income and all your monthly expenses, and it will calculate what size home loan you can potentially afford. By doing this you can prepare yourself, and possibly cut back on unnecessary things or pay off some existing debt so you can afford to pay off a bigger bond,” says Tucker.
3. Increase your deposit size
The size of your deposit plays a huge role in the approval process. The bigger your deposit as a percentage of the purchase property price, the better your chance of securing a home loan as there is less risk for the bank. Also, the bigger your deposit, the less you will need to loan and the more likely you are to meet the minimum monthly payment requirements.
Saving towards a deposit also shows lenders that you are serious about the loan and have financial discipline. “A deposit usually requires at least 10% of the home purchase price, but 20% will go a long way to helping you to secure the loan,” advises Tucker.
4. Work smart not hard
To improve your chances of getting approved, it is a good idea to apply to multiple banks, and this is where the assistance of a reputable home loan origination service comes in handy. MortgageMe submits an application to all major lenders on your behalf. “MortgageMe’s home loan application is completely paperless. One application gets sent to multiple banks, leaving you to choose the home loan that works for you,” notes Tucker. The MortgageMe origination process empowers home buyers to become their own originators by guiding them through the simplified application process.
5. Get your admin in order
The home loan application process requires a lot of documentation. Gather everything you need before you apply to speed things up. You will need to include a copy of your ID document, recent bank statements showing your income and expenses, a signed offer to purchase containing both the seller’s and the buyer’s details, and recent pay slips.