Investors across the country make the same mistakes time and again, which can reduce their chances of securing finance.
Blogger: Obu Ramaraj, director, Smart Money Solutions
Time and again I have seen these common mistakes ruin someone’s chance of getting a loan. So here are my top seven tips to get your home loan approved.
1. Disclose all liabilities
Be aware that lenders can find out your existing liabilities by having a look at your credit file. One example is disclosing credit card limits. The general assumption is that if you pay off the credit card in full every month, then you do not need to disclose it as a debt to your lender when making a home loan application.
You always have access to the limit available on the credit card and hence lenders will include it as your debt. If you think a credit card reduces your borrowing capacity, you can look at either reducing the card limit or closing it.
2. Provide all requested paperwork
You may be a longstanding client of a particular bank and they may have all your details. But the best and fastest way of getting your loan approved is to provide all paperwork and documents requested by your broker or lender as soon as possible to fast-track your application approval.
3. Do not shop around for pre-approvals
Some of you may get pre-approvals from two or three different banks to see who offers the best deal. This is frowned upon by the actual bank you want a loan from. Always choose a bank to suit your needs rather than just based on interest rate. For example, as an investor, if you want to renovate post-purchase, then choose a lender accordingly; not one with low interest rates only that will not help with your goal of building your property portfolio.
4. Maintain good conduct on all your bank accounts
Lenders look at all transactions on your bank account statement. If you have too many dishonour fees or late payment fees, it rings alarm bells and can potentially mean that you may not get your loan approved. Aim to maintain good conduct on all your accounts at least three to six months before you want to make an application for your home loan.
5. Genuine savings history
Many times people keep moving money from one bank account to another quite frequently. To make it easy for your lender and to satisfy genuine savings requirement, it is good to transfer any savings (minimum of 5% plus costs) to one bank account and let it be there for three to six months until you are ready for a pre-approval.
6. Your credit file
Your credit report contains information about your credit history. The information is collected from credit providers, courts and other organisations by credit reporting agencies. If you don't make payment on a debt, your credit provider may refer your debt to a debt collector and/or report your debt to a credit reporting agency and ask them to record the default on your credit report.
The danger is when you don’t realise you have a bad report on your credit file. This can sometimes happen without your knowledge and it is important to keep an eye on your credit file. You can obtain a free copy of your report at any time.
7. Do not change jobs in the midst of your loan approval process
Never ever change jobs when you are in the midst of buying a home. You need to be aware that the lender may not approve your loan if your job conditions don’t meet their credit policy. You may be stuck with a property without a loan!
Good luck with your property purchase.
Obu Ramaraj also known as ‘The Mortgage Angel’ is the Director of Smart Money Solutions, a mortgage broking firm helping women get stress free loan approvals. She is also the author of “Smart Women, Smart Home loans”, blogger and a speaker. For more information visit www.smartmoneysolutions.com.au.