6 things to consider if you're trying to get a mortgage
If buying a home is on your bucket list, there are six things to think about that could help your chances of getting a mortgage.
1. Keep your credit under control
Want to know more? Here are some more tips on how to keep your credit under control.
2. Check your existing credit score
There’s a common misconception that checking your credit report can negatively impact your overall score - this isn’t strictly true.
In fact, there are two types of checks that can be made on your credit score. Checking your own credit report is known as a ‘soft’ enquiry and won’t affect your score. However, giving a lender permission to check your credit report is classed as a ‘hard’ enquiry and this does affect your score.
The Australian Securities and Investments Commission [ASIC] suggests an annual check, something you are entitled to do for free1, to:
- Make sure that your name or date of birth are correct
- See if your address needs updating
- Check if any debt has been listed twice or whether the amounts are correct
- Whether you have been recorded as missing any repayments
- Whether someone might have stolen your identity to get credit
If anything is incorrect, now’s the time to get things fixed. You can do this for free by ordering a report from a credit reporting bureau, such as Equifax.
Want to know more? Learn how a credit score is calculated and what can cause a default to occur.
3. Keep all your documents up to date
Lenders will need certain information from you when you apply for a home loan, so they can get a full understanding of your financial situation. So it’s a good idea to keep the latest statements for your loans and any credit cards, your savings records, as well as your pay slips and tax returns on hand to help speed up the home loan application process.
As a specialist lender, we understand that providing the necessary paperwork to document your income can sometimes be a challenge especially if you're self-employed. That's why we offer alternative documentation (alt doc) home loans for so called ‘non-conforming’ borrowers.
4. Work out the right type of mortgage for you
Fixed or variable? Principle and interest or interest only? When you are choosing a home loan it's important to work out the features you need from your loan and what that will cost you in fees.
Again, ASIC offers a useful overview. They cover the different types of loans available and what you need to consider before you sign up. Including:
- How to compare home loans
- Principal and interest loans
- Interest-only loans
- Variable, fixed and split rate home loans
- Redraw, offset and line of credit
- Construction loans for building or renovating
5. Avoid changing jobs during the buying process
Leaving the corporate world to start your own business can be an exciting career change, but it may affect your ability to borrow when you’re trying to secure a home loan.
Some lenders may assess your income and savings, amongst other factors during the application process, and starting a new business might mean inconsistent cash flow at the beginning of the venture, or a lack of standard documentation.
Want to know more? We've pulled together some handy tips on home loans for the self-employed.
6. A word about ‘genuine’ savings
Source: 1 MoneySmart credit report fact sheet
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