8 ways to boost your chances of loan approval
1. Boosting your credit file
Before applying for a home loan, get a free copy of your credit report from Veda, D&B or Experian. This will allow you to see what lenders see when they review your application. Once you have a copy of your report, check everything for errors and if you spot an issue, notify the company responsible immediately. Sometimes it can be something small like a wrong address or an old credit card account you no longer use but haven’t closed.
2. Having proof of genuine savings
It’s likely that you’ve been putting cash away each week in order to save up your first home deposit but if you haven’t, and you were planning to rely on a gift, tax refund or grants like the First Home Owners Grant (FHOG), it is time to start saving. These days, most lenders have a mandatory genuine savings policy for anyone who applies for a home loan, especially if you are borrowing 90% of the property value or more. You’ll be required to show at least 3 months of genuine savings. Types of savings considered genuine savings are savings accounts, term deposits and mutual funds.
3. Holding off on career changes
When applying for a home loan your finances will come under a lot of scrutiny and lenders will want to see that you’ve been in your job for a decent length of time so save the career changes until after you’ve got your mortgage.
You’ll need to supply copies of around 3 - 6 months of your most recent payslips to the bank when you apply.
4. Reducing debts as much as possible
In addition to saving for that deposit, you’ll also need to show the lender that you’re able to manage your money responsibly. If you have a car loan or credit card, make more than the minimum monthly repayments.
5. Staying up-to-date on all bills
With the move to positive credit reporting, lenders will know when and how often you make late payments. It's always best to set up a direct debit for utilities and credit card payments and when you can top up with an extra repayment during the month.
6. Keeping other applications to a minimum
Every application for credit goes on your file (including mobile phones) so in the months before you apply for your home loan, hold off on getting a new phone, TVs or any kind of store card until after your mortgage is secure.
7. Breaking with past relationships
If you had joint accounts with an ex and never got around to getting your name removed from the account, now is the time. You don’t want their credit history affecting your application.
This also applies to businesses you may have dealt with in the past but you haven’t bothered to close off the account. Keeping your credit file as clean as possible
8. Living within your means
Good money management skills are a must-have when owning your own property. You might be required to show copies of recent bank statements to prospective lenders to demonstrate that you can live easily within your budget.