5 Tips to Secure Home Loan Approval

Graeme Salt

Spring has sprung which means that many Australians will be looking to buy property in the next few weeks.



 



But, what happens if you fall in love with a home and then discover the bank won’t lend to you? Even worse, what happens if the bank turns you down and it’s your fault? Here are five tips to make sure you are properly set up for that home loan.



 



1. Check your credit file



Some of my clients were recently declined by a mid-tier bank because they had a couple of gas payment defaults on their credit file. Trouble is, this was the first that my clients knew about it because the defaults related to their old home. Thankfully, we got them approval with a Big Four lender – but it took a lot of work.



 



All the stress could have been avoided if they had checked their credit file before they applied for a loan. The good news it’s free to check your credit file, check out the details on www.mycreditfile.com.au



 



2. Get your savings in order



Lenders like to lend to people who can show they are responsible with money. So, they like to see money in account for three months without succumbing to the temptation to blow it on new clothes.



 



So, if your Granny is going to help out with the deposit, it’s easier to have the cash in your account for some time before you apply for a home loan. I once had a client whose family came from a developing country which was subject to quite a few UN sanctions. His family were gifting him some money, but getting money out of this country is really hard. So the money was appearing as odd random cash deposits made all over Australia. It took me ages to prove to the bank that the applicant wasn’t a drug runner or an arms dealer.



 



Had the cash been ready and waiting in his Australian account for some time, it would have been much easier.



 



3. Pay your bills as soon as possible



When you apply for a home loan, the first thing a bank does is check your credit file. Once upon a time, the credit file just showed if you were in default or had made too many credit enquiries. Now, under a new law, credit files can show who is a prompt payer. So, from now on, it’s in your interest to pay any bill as soon as you can.



 



4. Reduce your credit card limit



It might boost your ego to have a platinum credit card with a $50,000 limit. But do you need all that money?



 



When the banks are assessing how much they will lend to you, they will take that credit card limit as money already leant (even if you pay it off every month). As a result, they may well reduce how much they will lend you based on that limit. You may want to reduce your credit card limit if you don’t need all that money. I once could only get a home loan over the line once we got a client to reduce their credit card limit.



 



5. Know your limit



Not all banks are the same. For example, if you were a brand new customer, if you walked into an ANZ branch then the most they would lend you is 90 per cent of the value of the property (others may go up to 95 per cent) – even if you are a multi-millionaire (it’s just their policy). You could be a good home loan candidate. But if you just go to your own bank because you think that all banks are the same, you could be in for a shock. Good brokers know what each bank’s lending policy is and now where you are most likely get home loan approval.



 



Graeme Salt is a mortgage broker with offices in Melbourne and Sydney.  For a no-obligations consiultation he can be contacted on 1300 30 67 67