Are you planning on buying a home sometime soon? A home loan will usually be a big part in making that a reality. In the current financial market, it is more important than ever to ensure that you are practicing excellent financial management, no matter what your income. In the eyes of lenders, there are a few things you can do to position yourself as a favourable and low risk applicant.
Particularly if you are planning to buy in the next 3-6 months, it’s time to pay attention. Incorporate these tips into your lifestyle and you are well on your way to a successful home loan approval. You may also find you enjoy implementing them into your daily life! They certainly will give you a strong sense of empowerment, help you save more and make lifestyle changes.
One of the first things to be aware of is that lenders have changed the way they review your financial position. You will need to provide bank statements as part of your application process and the lender will be looking at the conduct on your statements.
- Do you pay your bills on time?
- Is your account ever overdrawn?
- Do you transfer to a savings account each month?
- Are your repayments to existing debt made on time?
- If you have credit cards, do you pay them off each month?
- What are your spending habits on the things you want vs the things you need?
Lenders will look at what you do today, and what you’ve done in the past to establish what you will do and are able to financially manage in the future. Will it take a lifestyle change to manage the home loan debt? Or does your current conduct of your finances verify that you are well within your means of managing the proposed home loan repayments?
Tip #1 Living Expenses
- Monitor your spending habits – where can you save if need be?
- Understand where your money is being spent, a great tool is our budget planner
- There’s also some great apps to help you manage your personal finances, The 8 Best Expenses Trackers for 2019
Tip #2 Make your repayments on time (for existing debt)
- Lenders will want to see that you can manage your existing debts by making your repayments on time, they will look at the consistency of these payments from month to month
- Remember, it’s not whether you have the funds available to make your repayments on time, its’ showing that you consistently ensure you do
Tip #3 Pay your bills on time
- A great way to do this is to set up a separate account for bills, work out how much you need to transfer to this account each month (or within your pay cycle) and set up direct debits from this account. This step alone will bring you a great sense of freedom and certainly makes you look good on paper!
- Don’t over extend yourself. Review your discretionary spending, are you spending money on things you don’t need? For example, do you really need Netflix AND Stan?
In summary, lenders want to see consistency and excellent financial management within your current circumstance. They want to know that you can comfortably afford to make the proposed home loan repayments within your current lifestyle. If you are planning a purchase (or a refinance) in the near future, get in touch with your broker now for a free review of your finances. They will help you get set up now for a successful home loan approval in the future! (08) 9367 4222, [email protected] or fill out the form on this page.