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Getting approved for a home loan
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5 tips to increase getting approved for a home loan

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5 tips to increase getting approved for a home loan

It appears that 2019 is poised to be another important year for home owners, investors and those looking to enter into the housing market. Home loan advisers are being asked more than ever – “what will happen to the property market this year?” While there is no magic answer, perhaps a more apt question could be asked in its place – “what will happen to home loan lending in 2019?” Many economists point to the correlation between house prices and home loan approval rates. Recent data released by the Australian Bureau of Statistics (ABS) show that November home loan approvals fell by 0.9% and the total value of home loan finance dropped 2.5%. This data supports many economists’ beliefs that banks are their tightening their lending criteria and being more selective of how their loans are dispersed.

The good news for first home buyers and investors alike is that there are a number of ways to improve your credit rating and financial position in order to satisfy the lending criteria of many banks and lending platforms. Engaging a financial adviser, or home loan adviser is the best way to completely evaluate your current financial position and formulate a personalised plan for accessing the right amount of finance under the right conditions.
  1. Prepare your paperwork and show stability
More than ever, Australian banks want to see stability in the finances and lives of their borrowers. Stability means having a sustained period of employment, consistent savings, lack of unnecessary expenses and the less credit applications the better. Ensure you have collated as much evidence to support your financial position as possible. Don’t turn up to a meeting with the bank without recent credit card statements, bank statements, superannuation statements and a detailed analysis of your financial position. This shows the bank you have a working knowledge of all of your finances and are prepared for the responsibility.
  1. Cut out unnecessary financial commitments and consolidate debt
Paying down credit card and personal debts are important steps on the road to home loan approval. These debts affect your home loan application in two ways. This credit will show on your file as credit applications; too many can be detrimental. Secondly, the bank will take the sum total of your credit limits and loans when assessing your financial capacity.
  1. Make sure you can show ability to repay
This means more than ensuring you have outlined your work history, savings history and a detailed financial analysis of your expenses and income. Many banks want to see that you have a safety net in place. Having adequate personal insurance is a great indicator for lenders that you have looked at all angles, but most people don’t think about it.  When you are applying for a home loan, it can be the perfect time to review your coverage against your current situation to ensure you are sufficiently covered.
  1. Understand and actively improve your credit rating
All borrowers should have been making an effort to regularly check and improve their credit rating in the months leading up to applying for their home loan. This will give you the opportunity to identify any missed defaults, late payments or negative events on your file before a lender accesses your file. It could also give you the opportunity to pick up on any glaring mistakes in your financial history. With recent updates to the credit reporting of financial institutions, early payments and favourable financial events will also be reported on.
  1. Speak to a loan adviser
A financial planner can help you organise your finances before you apply, while a home loan adviser can assist with finding the best loan for your circumstances and assisting with the actual application process. A home loan adviser will make sure you have all the appropriate paperwork in order before the application is lodged and take you through the application process step-by-step. Nationally registered home loan advisers are also constantly engaged with the current trends and criteria of many financial institutions and can offer valuable insights into the loan process and how to prepare.

The question “what will happen to the property market this year” can be partially answered by the answer to “what will happen to home loan lending in 2019”. If prospective borrowers do everything in their power to understand, prepare and improve their financial position and home loan application, more people should be approved for loans. If more people are approved for loans, the data shows that house prices historically increase.[1]