It’s not easy these days to climb onto the property ladder. The interest rates might be at their lowest, however banks and lenders are tightening their lending criteria which makes borrowing more difficult if you don’t tick all of the boxes. In this article, money coach and financial counsellor, RAEWYN BLOMFIELD delves into what you can do to ensure your home loan application is considered favourably by lenders.
House prices are so high these days compared to the standard income level, that owning your own property sometimes feels like just a fantasy.
To achieve it, you must first believe it is a realistic goal, then dig deep to find the necessary self discipline to pull it off.
If you want your loan application to sail through, what do you need to do?
Save and then save some more
You’ve heard it all before: save as much as possible.
All financial institutions want to see the same 2 things – a six month steady savings record; and proof you can live within your income as shown by six months’ bank account records.
It not just the amount you save that counts, though it certainly matters; it’s also how you save – a small amount saved consistently gets more kudos than large sums saved irregularly.
Ditch the credit cards and personal debt
What do your bank account records say about your credit card habits? Keep in mind that any bank that you approach for a loan will look very closely at exactly what you are spending on your credit card and how you are managing your repayments each month.
The cost of your dream home: don’t let your dreams interfere with your common sense
It’s human nature to want the best we can afford, to fall in love with a property at the limit of your pre-approval.
Remember you are not guaranteed the amount in the pre-approval, it’s just an estimate and final approval depends on a whole range of factors.
This is your dream property that you have waited years for, and which you hope to stay in for years to come. “Things may be tight for a year or two, but we’ll manage” you say optimistically to your partner. BUT here in Australia we are now in a recession, you could lose your job, get sick, and pay rates are unlikely to change for years.
Can you live with a stranglehold budget for years to come?
Then there’s the fact that it can cost more to own than to rent the same value property.
You’ll sleep better at night if you:
- Know exactly the amount it costs you to live as you are now, and where it can be trimmed.
- Know exactly how much running the property you have in mind will cost you.
- Have an emergency fund big enough to cover both expected costs like Christmas and home ownership emergencies such as finding a plumber and paying for emergency rates.
How much does it cost to get this deal over the line?
Your Mortgage Advice Bureau Broker is the expert here.
- Discuss all the buying costs associated with your chosen property.
- Check what other concessions you may be entitled to. Each state offers their version of the First Home Owners Grant.
Peace of mind is a priceless commodity. Don’t let today’s decisions on how you spend your money create money stress tomorrow.
I would love to work with you to give you the skills you need to move forward on your financial journey and to better prepare you for the future. With your spending controlled you can then start to create for yourself and your family a better lifestyle and more secure future.
Money coach and financial counsellor, Raewyn Blomfield, is the principal of Money Health Money Wealth. Raewyn helps people to manage their money and take control of their spending and debt so they can achieve their financial dreams.
General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.