If there’s ever a time for a bit of financial housekeeping, it’s before going to apply for a home loan.
Sure, you don’t have to ditch the coffees and takeaway completely; but that Afterpay debt could have your credit score looking a little rusty, or even out of shape from those missed bills.
Whether you’re borrowing for a first home, trying to upgrade or wanting to invest, the mortgage process can leave many want-to-be buyers feeling clueless and overwhelmed. How much do I need to save? Do I need another job? What will the banks be looking for… and looking at?
And with lenders expected to tighten their belts this year, change their criteria and take an even deeper dive into income, cash flow, repayments and overall expenses, now’s the time to spring-clean your spending and get all that documentation in order.
The great news is, if you’ve done your research and have an idea of what your dream home is likely to cost – and, you’re chipping away at saving a deposit – then most of that initial prep is already done; you’re over the halfway mark. The rest is simply a matter of providing evidence and having a little foresight, in order to avoid being ‘bitten’ by a rejected loan application down the track.
We’ve got you covered below with our top 5 must-haves to fast-track your home loan application, regardless of the lender – or whatever stage you’re at!
1. A list of your expenses – and a plan to settle any debts
If you’re tempted to shave off those streaming subscriptions and other ‘nice-to-haves’ from your expenses calculation… think again. Honesty is the best policy, especially when it comes to applying for a loan (and having a bank check your transaction history). So it’s wise to be upfront about those entertainment and recreation expenses – or to trim these down a few months prior to starting an application, if you’re concerned about them.
In general, the most common expenses asked by lenders are:
Housing expenses such as groceries, gas, electricity, water and other utilities
Rent or mortgage payments if you’re currently renting or paying an existing loan
Entertainment such as Netflix and other streaming services, movies or dining out
Clothing and personal care such as hairdressers or massages
Education or childcare costs
Travel or motor vehicle such as petrol or transport
Insurances such as car or private health insurance
Medical and health such as dental appointments
Personal debts can also be red flags, so consider paying off any current car loans, credit card debt or putting on hold major purchases (until you’re unconditionally approved, at the very least) if you’re wanting to increase the likelihood of a successful application. Sure it might take a little extra time, but you’re likely to get that time back without having your financial stability questioned down the track!
2. Details of your income
This one’s pretty straightforward; banks need to know what your employment status is, whether you’re full time / part time, a contractor, sole trader or otherwise, and what your average earnings are.
While there’s a tendency to assume that higher income automatically equals higher borrowing capacity, don’t forget that lenders equally consider the type of employment, how stable this is, as well as the percentage of your income that goes to household expenses.
As a general rule of thumb, banks will typically request the past few months of payslips, tax or business returns, as evidence of your income, so be sure to collect these in the lead up.
3. Personal I.D
While some lenders will request two forms of identification and others more, it’s better to be a step ahead and have these in multiple forms if you can.
Personal I.D can typically be a:
- Driver’s licence
- Birth or citizenship certificate
- Passport
- Centrelink or pension card
- Medicare card
- Recent utility bills
- Recent tax assessments
Be sure to have a couple in paper form, or saved to a folder for easy access.
4. Assets and liabilities
You may have come across these on multiple occasions – in general, assets include:
- Bank account details (with proof of your savings)
- Superannuation statements
- Any property you may own
- Cars or other motor vehicles
- Shares (and statements of these)
While liabilities include:
- Details of any existing personal loans, credit cards or other debts including your mobile phone costs
- A calculation of your everyday living expenses
5. An idea of what you’re looking to buy, and what it will cost
Lastly, banks are going to want to know where you’re looking to buy and what (i.e, an apartment, townhouse, house etc.).
Of course, you may not have an exact property in mind, and might only be at the start of your search; but this is where speaking to a financial advisor, broker or accountant will help you to determine your budget. Reaching out to your local real estate agent will also give you an accurate indication of the current market and what you’re likely to spend on your dream home – and therefore, the deposit required too.
When it comes to getting your home loan application right, the best solution is to be prepared ahead of time with all of the above paperwork and evidence. The bottom line is to have a genuine savings plan, and to cut down on any unfavourable expenses, as well as to live within your means and be real with what you can afford.
And when in doubt, reach out to an experienced professional who can help you on your way!
Prudential Real Estate Campbelltown | (02) 4628 0033 | campbelltown@prudential.com.au
Prudential Real Estate Liverpool | (02) 9822 5999 | liverpool@prudential.com.au
Prudential Real Estate Macquarie Fields | (02) 9605 5333 | macquariefields@prudential.com.au
Prudential Real Estate Narellan | (02) 4624 4400 | narellan@prudential.com.au
