When you look to purchase a home, there are many requirements you need to meet so that a lender will approve your application, being aware of these well in advance will give you the best chance of having a lender want your business and ultimately approve your application
1 – Credit history.
Your previous credit history is very important. It is the first thing lenders look at, as they take this as an indication of your future ability to repay their loan. Late payments on loans or any credit facility (credit or store cards, personal loans etc) will have a negative impact on your application, so check your accounts and make sure the history is perfect.
Get a copy of your Credit File, this will show your credit score, and 5 years history of any credit enquiries you may have had. Equifax is the company that most lenders use to access your credit file. You can get a copy of your file (there is a cost associated) from https://www.equifax.com.au/personal
If you enquire with Real Estate Home Loans we do this for you and provide you a copy.
2 – Savings History
Most lenders require you contribute to the purchase from your own savings. This is usually a minimum amount of 5% of the proposed purchase price. Lenders categorise savings as Genuine and Non-Genuine and your contribution must be a minimum of 5% Genuine savings. So what is the difference; Genuine Savings is funds saved and held or accumulated over a minimum period of 3 months.
It is best to keep your savings in a separate account which you regularly add to each pay cycle. Accounts where the balance fluctuates up and down constantly makes it difficult to assess the “genuine” component. Make sure that the savings come from regular transfers from a wages account to savings and that any one-off type transactions (tax return, sale of an asset, gift etc.) is held in the account for at least 3 months prior to applying for finance
3 – Work History
Your employment history plays a big part in your eligibility for finance. Lenders are looking for consistent work history with the same employer. If you have just commenced with an employer and have a probation period it is best to wait till the probation has been completed. If you have had a number of career changes in the last 3 years lenders will be looking for the reasoning behind the changes.
Employment status of Permanent full or permanent part time work is preferred by lenders, however if you are employed as a casual and have been there at least 6 months a lender may consider this as acceptable, this varies from lender to lender as do most policy’s.
4 – Residence History
Lenders like to see stability in your residence history. That is, you’ve lived in the same residence for a reasonable amount of time. If you have been paying rent, through a licenced real estate agency, under a lease agreement in your names only, in the same home for at least 12 months, some lenders will look at this and use this as a substitute for genuine savings, providing you have sufficient funds from other sources to complete settlement.
5 – Living Expenses
Everyone has a different lifestyle and therefore different living expenses. Lenders are looking at the transactions on your everyday account to determine what your living expenses are. No longer will lenders apply a standard amount to you as a living expense, they want to know what your spending habits are. It is best to forecast and keep track of your living expenses and the best way to do this is to complete a budget. The last page, we have attached a simple budget that is a good starting point to assist you in working out what your spending habits are.
By following these 5 simple instructions, you will give yourself the best chance at getting your home loan approved. Naturally, the approval will take in to account the level of income, debts, and your personal contribution.
If you want to find out where you are at in the Home Buying Timeline call us and have a chat on 137 345
Real Estate Home Loans, helping people achieve their dream for the past 17 years