Wavelength - brought to you by bcu
Heterosexual couple sitting at desk with real estate agent, woman is smiling. Real estate agent is handing the woman keys, and the keys are the focus of the image.

Before you start attending open house inspections and picking out new curtains, there are a few things you’ll need to do upfront to help try and ensure your home loan application will be approved.

1. Have a solid savings stash.

Most lenders these days will require you to show genuine savings, so in the months leading up to your home loan application you’ll want to make sure that you are putting as much as you can into your savings account. Not only do you need to save money for your deposit, but there are other expenses like building inspection fees, conveyancing fees and home insurance that you’ll need to factor in.

2. Know how much you can borrow.

So many first home buyers overestimate how much they can afford to borrow. It’s not just about how much money you’re earning; you’ve got to think about what other expenses you’re paying off, and what will happen if home loan rates go up. Use a borrowing calculator to give you an idea of what you can afford to borrow given your current expenses.

If you find that you’re currently paying less for rent than what you will be paying with mortgage repayments, practice paying the higher amount each month. Put the extra money into a savings account, so you can prove to yourself (and the bank) that when you do have a mortgage you’ll be able to pay it easily without having to cut back on your lifestyle.

3. Don’t quit your day job (yet).

Most people daydream about quitting their job, but if there’s any time NOT to do it, it’s just before you apply for a home loan. A common mistake I see is people leaving their salaried jobs to be self-employed, but without proof that you’re regularly making money, your chances at home loan approval drops. Lenders will ask to see tax returns, payslips and bank statements, so a regular and steady income can only help your chances.

4. Practise good credit habits.

If you haven’t been paying attention to your credit score, now’s the time to start, because it’s one of the most important things a potential lender considers in approving your home loan application.

There have been recent changes to credit reporting and now lenders have a more comprehensive view of your spending and repayment history. To make sure your credit report is in its best possible shape, keep up to date with your bills and make more than the minimum repayment on any credit cards or loans. If you’ve got a lot on your plate like I do, a good way to make sure nothing gets forgotten is to set up direct debits.

5. Apply for pre-approval.

So you’ve done all you can to get ready for your mortgage application, and now you’re ready to apply for pre-approval. Getting pre-approval will mean that you’ll have a better idea of what price range you’ll need to aim for with your first property. There is no point in looking at mansions by the sea, if your lender is only going to approve you for an apartment. Shop around and find a home loan offering a great low rate and free extra repayments, so you can get started on the right foot.

Once you’ve put in the hard yards and have set yourself up for a positive result, it’s time for to get out there and start looking for a place to call home.

Picture of Steve Jovcevski, who is Mozo’s property expert.

Author bio:

Steve Jovcevski is the property expert and home loan negotiator at mozo.com.au. With an extensive knowledge of mortgage products and housing trends, Steve is full of practical tips to help homebuyers get the most value out of their home loan.

Important information

Information on this website is general and has been prepared without taking into account your objectives, financial situation or needs. You should consider whether this information is suitable for your objectives, financial situation and needs before acting on the information provided.