So, you’re finally ready to buy your first home! Congratulations! This is an exciting time in your life. But before you can start packing boxes and dreaming of lazy Sunday mornings on your porch, there are a few things you need to do. One of the most important steps is getting pre-approved for a home loan. This article will give you some tips on how to increase your chances of getting approved for a mortgage.
Check Your Credit Report
Now, this may seem like an obvious step but it’s definitely crucial if you want to increase your chances of getting pre-approved for your home loan! Your credit report is the first thing that lenders will look at to see if they are willing to approve you and can also increase or decrease your interest rate depending on what your credit report looks like. When you get your credit report you can evaluate what is on it and even take steps in fixing it if you need to. Just remember, just because it is on your credit report doesn’t mean it is accurate! Sometimes there can be mistakes made on the credit report that can affect you in the long run. Make sure to take a close look at it and watch out for certain things like a debt that has already been paid or discharged and information that is inaccurate.
A lot of people don’t realise, but buy now, pay later services will affect your credit score as it is looked at like a credit card. If you do have these types of accounts like afterpay and zippay you may want to close them at least six months before you go for a home loan. This will also help with your credit score.
Lower Debts if Possible
Again, this is another obvious step but definitely another important one. Lenders will compare the amount of debt you have to your overall income. They will then evaluate how much money they feel you will have leftover to calculate if you will be able to afford mortgage payments each month and how much they would be able to give you. Keep in mind that they will also be calculating if interest rates were to go up if you could still afford the repayments.
One of the best possible things you could do is cut back on as much as possible to reduce your ongoing debt at least three months before you apply for pre-approval. Another tip would be to not make any unnecessary purchases between now and when you go for your home loan, lenders do look at your bank statements and go off how much money you spend. This can include alcohol and cigarettes.
Down Payment
It is easier said than done but if you can, put a large down payment down! If you are able to make a down payment of 20% then do it. This will mean that you won’t have LMI to pay and can even increase your chances of getting a good interest rate. A lot of lenders would be more willing to approve you if you have a 20% deposit already there as their liability will not be as high. It will also decrease your weekly mortgage repayments!
Now of course not everyone can do that and a large down payment is usually the hardest part about buying a home and there are other alternatives for you. Some lenders are willing to approve you with a 10% or even 5% down payment however there may be more steps they will need you to do before being approved. The good news is if you are able to get the First Home Owner Grant this can in fact go towards the deposit, it’s best to speak with a mortgage broker to see what your best options are!
Visit a Broker
This goes for anyone and everyone, it is best to go visit a mortgage broker as they can see a range of different banks and what each bank is willing to do for you. They can also give you tips that are personalised to your situation to give you the best chance to get into a home faster.
If you are ready to buy or in need of any assistance please contact us today to see how we can help you!
