Buying a house in 2022 can seem like quite a mission. Aside from tough competition at open homes, listings are seemingly snapped up as quickly as they appear, and the overall prices seem more and more unaffordable. Add to that that there's increasingly a lot to navigate when getting finance approved; it can be tough to know where to begin. As mortgage brokers, we're well versed in helping overcome the challenges of the local lending market from end to end, so we've put together a few things to consider to help you get started.
In this article, we cover:
What will be assessed in your home loan application?
What information will be required?
The Astute Difference
The difference between a home loan application being approved and denied can be hard to spot. Lenders are increasingly putting the onus back on the borrower to ensure paperwork is correct and accurate. A mortgage broker is tasked with getting you across the information required and ensuring you put your best foot forward with your application. For your planning, here's a list of the types of things that will be assessed in your submission:
Savings & Deposit
Residential stability
Employment History
Income & Spending Habits
Credit score
Assets and liabilities
Savings & Deposit
Usually, you need a 5–10% deposit of a property's purchase price. By saving a larger deposit, you can increase your chance of getting your home loan approved. If you save a 20% deposit and borrow less than 80% of the purchase price, you don't have to pay mortgage insurance.
Employment History
In assessing your loan application, the banks seek to understand your ability to pay the loan on an ongoing basis. If you're recently employed, it's a good idea (but not always critical) to wait until after your probationary period has been completed (usually three months), as you'll need to provide payslips to show that.
Income & Spending Habits
Your spending habits include food, mobile phone bill, clothing, entertainment including subscriptions, dining out, utilities, education fees, motor vehicle costs and insurance. Essentially, anything you spend money on other than debt. Your disposable income will be assessed as a way of understanding your ability to manage your finances. Disposable income should be reflected in your financial position, i.e. savings.
Credit Score
The best way to maintain a good credit score is to pay your bills on time as your repayment history will be assessed when applying for a home loan. That includes paying on time an existing mortgage, your utility bills and any credit cards in your name. Should you have any credit disputes are sure to clear these up directly with the provider.
Any late payments on your credit report in the last 24 months will need to be explained. These will be represented as a 1 or higher on your credit report.
It's possible to arrange a credit assessment of your circumstances. The Astute East Brisbane office can arrange this for you on request.
Assets & Liabilities
On a mortgage application, assets and liabilities are a good way to show the bank you are in a good financial position. It can sometimes not seem relevant, but including accurate superannuation balances, personal contents, and even small amounts of shares that you own can make a difference. Often these items are overlooked, and subsequently, the lender systems can view your application poorly as it appears as though you haven’t acquired life assets. Additionally, you should always have some contents and super.
With liabilities, it’s important to include everything. This includes credit cards with that you owe nothing on, HELP/HECS debt, tax debts, and even small loans that will be paid out shortly. Even if you have paid off your credit card in full, it’s important to remember that the bank will automatically treat the debt as fully drawn to the credit limit. This is because you can do this at any time.
Its also important to be aware that Zippay, Afterpay, and other store credit arrangements are also considered credit cards. If these aren’t needed, then closing them will help unnecessary delays. A common misconception is that a fully paid off credit card can work to your advantage however that is not the case and it is advisable to cancel these entirely in advance of your loan application.
Assets and Liabilities assessed in loan application
What other information is required for your home loan application?
Information required:
1. 100 points of identification, typically in the form of a
a) driver licence
b) Medicare card and/or passport
c) Any change of name documentation – birth certificate/marriage certificate
2. Proof of income, which will typically include two to three months' worth of payslips
3. Proof of savings, typically in the form of two to three months' worth of bank statements
The Astute difference
The difference a mortgage broker can make to secure a loan over going directly to a bank is a mortgage broker will typically have a wider selection of accessible loan solutions, and they are legally obligated to recommend based on individual circumstances.
At Astute, we see success stories every day, and we're here to help you achieve your goals. We specialise in the Brisbane market, so we know our local area well. What might seem impossible at first can often be very achievable, and our depth of experience in the local lending market has made us the first choice for a large customer base for many years. For us, it's important to be able to sleep comfortably with any decision that you make, so rest assured we're here only to recommend solutions that we feel will work for your individual circumstances.
If you'd like to know more about applying for a home loan and equip yourself with the right information as you pursue your dream of buying a home, reach out to us. We'll be happy to help.
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General Advice Warning: This communication contains general information only and in no way constitutes the provision of professional advice, nor should it be relied on as a substitute for financial, credit, accounting, legal or other professional advice. We have not considered your financial situation, investment objectives or particular needs. Before making an investment or financial decision, a person must seek appropriate independent professional advice and also consider whether this information is appropriate to their needs, objectives and circumstances. The author as well as their representatives, agents and employees give no guarantees and make no representations, express or implied, as to the accuracy, currency, completeness or suitability of the information contained in this document. Nor do they accept any liability whatsoever as a result of any information herein being incorrect, incomplete or unsuitable or as a result of a person in any way using or relying on the information herein