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Getting a home loan approved can seem like a daunting process and can seem like an ongoing battle, particularly if you’ve been knocked back before. At Lendi, we’re here to help you navigate through the approval process and ensure that you put your best foot forward when applying for a home loan, follow these 7 tips below and you’ll be on your way to a new home loan in no time.
Figure out what your budget is and how much you can afford to pay in home loan repayments. Be realistic with your budget and factor in a 5 percent buffer so that you don’t find yourself short. Calculate your borrowing power and assess how much you can afford to repay each month.
If you’ve been knocked back before, it could be time to review your budget and come up with a more realistic one. The aim is to stick to this budget for at least 6 months prior to applying for a home loan. You need to have a solid history of savings so that lenders can see how well you can save, and so you can put in a good deposit. The larger the deposit, the lower your loan-to-value ratio (LVR), which can help you save on your home loan.
This is an important aspect in getting approved for a home loan. To lenders, a stable lifestyle is ideal. This may be having a steady job and show a solid financial history. If you have to change jobs during this 6 month period, aim to stay in the same line of work, or hold off on making a career change until after you’ve been approved for a home loan. Maintaining stability can help show that you can make your regular home loan repayments on time.
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Along with the three points above, your credit history will play a large part in getting approved for a home loan. Do you know what the contents of your credit file say about you? Do you have any outstanding debts that haven’t been paid? Lenders will use your credit report to calculate your borrowing power, which is what determines how much they will lend you.
A good credit score can benefit you as you may able to get lower rates, while a bad credit score increases your risk as a borrower. However there are still options available to get home loan with bad credit.
If you’ve got credit cards, it could be a good idea to reduce your credit limit or even the number of cards you have. An important fact to be aware of is that for every $100 of credit limit you have, could lower your borrowing capacity by up to $500.
Reducing the amount of credit cards you have may be helpful to your home loan application. This applies to store cards as well. Personal loans also count, so the less debt you have when applying for your home loan, the better chance you have to getting approved.
In the lead up to getting a home loan, you’ll want to ensure that your bank accounts portray the right picture to prospective lenders. This means that you don’t want to have any late payments showing on your account, nor do you want to have any of your accounts overdrawn during this period.
Most lenders will want to see at least 3-6 months worth of bank statements, so it could be helpful to make sure that they’re in order.
If you’re self-employed, making sure that your taxes are paid up-to-date and that you don’t have any outstanding debt could be a good idea before applying for your home loan.
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One way to ensure that you get approved for a home loan is to utilise the services of a Home Loan Specialist. Our team here at Lendi can guide you through the approval process and negotiate with lenders on your behalf.
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