How to Get a Home Loan?

By 25 May 2017Education
home loan

Applying for your first home loan is not always easy, as it is a huge investment. This is why it is necessary to plan well ahead of time and get your financial affairs in order. More importantly, you have to find a suitable lender if you want this investment to be successful.

Not only does it take the unnecessary pressure off of your chest, but it also will allow you to save a good amount of money.

What Does a Lender Look for?

The following are the five things every lender looks for in order to assess whether you are able to pay back the home loan or not:

  • Debt Capacity – It represents your ability to service the loan. You can calculate the debt capacity by taking into account your current income against your existing level of debt and prospective repayments. For example, the overall mortgage cost should not be more than 30 percent to 35 percent of your income. Whereas, your total debt should not be more than 40 percent to 45 percent of your gross salary.
  • Credit History – Every lender needs some kind of assurance that you will pay back the home loan. Therefore, they evaluate the credit history of a borrower to find out whether he or she will be able to pay it back. You will need a good credit score if you wish to qualify for a home loan in the future.
  • Collateral – The property of a borrower is used as security against the loan. Collateral implies that you will put your home up as collateral to get the home loan.
  • Capital – Lenders also wish to ensure that in addition to the home loan, you have sufficient capital or accumulated assets to finance your house purchase.
  • Character – It involves all of the above factors and also the basic assessment, including duration of your job, type of job, and for how long you have been living in your current house.

How to Improve Your Chances of Getting a Home Loan?

In order to improve your chances of securing a deal and getting a home loan, the following are five things you can do:

  • Understand the Type of Pre-approval – Not every preapproval is the same. It can either be unconditional – meaning you have been cleared to get a loan, or it can be conditional. Conditional approval requires you to meet certain requirements before you get access to the home loan. Therefore, it is beneficial if you get unconditional approval and you can get this by submitting the correct documents.
  • Compile all the Required Documents – Make sure you compile and submit all the necessary documents to apply for a home loan. For example, bring in the letter that contains the details of your income along with your bank statement. These documents will allow the lender to verify the source of your down payment. By making this information available, the preapproval process will be more likely to become unconditional. So, you must complete this task very early in the process so as to avoid the stress.
  • Request Your Broker to Assess Your Credit History – Although, not every broker would agree to do this at a preapproval stage, yet, it can be helpful in getting the final approval. Therefore, you must ask your broker to do it for you.
  • Build Good Credit – If you are applying for your first home loan, you need to win the confidence of your lender by showing good credit history. Therefore, start working on getting a good credit score to prove to the lender that you have good credit standing. You can achieve this by making credit card repayments on a timely basis. In addition to that, service the existing debt efficiently.
  • Avoid Switching Jobs and Don’t Make Expensive Purchases – Applying for a home loan is a very important step in your life. Therefore, you have to start managing your expenses ahead of time. For example, do not buy a car a few months before buying a house as it might cause hindrance when you apply for a loan. Also, do not change your job within eight or nine months before making the purchase as it may impact your credit profile.

Are you ready to apply for your first home loan? Chat to our team now on 1300 088 065 or email Joshua at Joshua.Vecchio@HunterGalloway.com.au

 

Mortgage Broker

Author Mortgage Broker

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