Buying your first home is an exciting experience, but it can also cause financial stress if you aren’t prepared. There are a range of important things you will need to know before you can proceed with your home loan application. Ultimately you want to find ways to increase your chance of securing the loan, as well as finding the right loan to suit your needs. Here are 4 of the top things you should do before applying for your first home loan.
Get Your Credit File In Shape
To make sure that your loan application has the greatest strength, you should start working on your credit history. Aim to have all of your credit cards and personal loans paid off 12 months or more before you apply for the loan. While lenders like to see that you have had loans in the past, the part that they’re analysing is your ability to pay things off! This is especially important when you have had a history of late or missed payments.
If you’re currently struggling and need debt help or budgeting assistance, consider contacting a debt solutions provider such as Fox Symes to help you pay back what you owe and get your credit file in shape fast.
Stabilise Your Employment
Lenders like to see that you have held your current position for a minimum of 6 months for full-time workers, and 12 months for most casual or contract workers. If you’re self-employed, some lenders will want to see proof of income from your business for the last 2 years. These criteria will change depending on the lender, the amount of the loan and the strength of your application in other aspects. Showing that you have strong and stable employment is a great way to bolster your application’s chance of success.
Work on Your Deposit
Obviously the larger your deposit, the less risk the bank takes on you and the greater chance your application has of success. Deposits range from 5-20%, with 5% being the general minimum. If you have saved a 20% deposit or more, you will not have to pay the Lenders Mortgage Insurance and your application may be approved even if you do not meet some of the other requirements.
Create a Strong Savings History
While a deposit is important, lenders want to see how you got it and how well you can save. If you’re considering getting a home loan, set up a dedicated savings account and contribute to it as regularly as you can. If you can start this at least 12 months before you apply, you should have a strong savings history by the time you’re looking to buy.
A home loan is one of the biggest financial undertakings you will experience in your lifetime, so it’s important to be prepared. Having a strong financial standing, good credit history and significant savings will give you the best chance of success when you submit your application. If you’re struggling to meet the lending criteria or want to consolidate your existing debts so you can focus on your home loan application, speak to Fox Symes and see how their professional team can help you to be debt free and ready for a new home.
Written by Emma Jane