Unless you’re a millionaire, your dreams of owning a house will likely involve applying for a home loan– which can seem like a pretty daunting process. However, understanding how to get approved for a home loan and what’s expected from lenders can greatly increase your chances of coming across as a desirable candidate.
So, what can you do to fast track your home loan approval? Here are six things to consider:
How to get approved for a home loan
Declare your expenses
It’s worth being upfront with your lender about your monthly expenses, as a check through your credit history can quickly reveal any discrepancies. A lender will likely understand if you’ve forgotten to disclose information but if it looks like you’re deliberately trying to hide expenses, your home loan won’t be approved.
Have a stable employment history
If you’re wondering ‘how to get approved for a home loan’, undoubtedly a stable job history and proof of savings are the two biggest indicators that you’re reliable. A lender needs to see that you’re capable of repaying the home loan, so having a stable employment history is one of the top things they’ll be looking at. It’s recommended that you stay with your employer for at least six months to a year before applying for a home loan. Considering a home loan is a commitment you’ll have for ten years or more, a lender needs to see that you’re able to keep up with monthly payments.
Know what you can afford
Though it may be tempting to apply for the house of your dreams, if a lender doesn’t think you’ll be able to pay it off, your home loan might get rejected. A general rule of thumb is that a monthly mortgage payment should exceed no more than 30% of your income. According to realestate.com, payments that exceed over 30% of the monthly income are far more likely to cause mortgage stress. If in doubt, try a mortgage home loan calculator to work out roughly how much you can apply for.
Keep an eye on expenses
One of the most important things a lender needs to confirm is your ability to pay off your home, so being able to demonstrate a track record of good financial decisions is a great sign that you’re reliable. On top of this, good budgeting will allow you to save more money for a home deposit, which is another indicator to lenders that you’re responsible with money – meaning your chances of getting approved for mortgage are greatly improved.
Check your credit score
If you’ve had your home loan approval knocked back or suspect it might be, it’s worthwhile taking a look at your credit score. Typically, getting approved for mortgage loans require a minimum credit score which can differ from lender to lender. Your credit score will be considered alongside your income, and your employment history. You can keep up a good credit score by paying bills on time and keeping balances low on cards. Be sure to check your credit score for any inaccuracies and dispute them before you apply for a home loan.
Low doc home loans
If you don’t have all the necessary documents needed for a conventional home loan, you can apply for a low doc home loan instead. A low doc mortgage doesn’t require as many documents to verify income and is a more straight forward process. This is a good option for small business owners or for those who are self employed, as sole traders may not be able to provide pay slip records or tax returns. Small home loan approvals do require verification of income, which could include recent bank statements from your business account or BAS statements.
Bad credit home loans
If you’re wondering how to get approved for a home loan with bad credit history, talk to a bad credit mortgage broker for some advice. Most major banks and lenders will reject an applicant with a bad credit history but there’s still a lot of non-conforming lenders who will consider a home loan application if the claimant has good reasons for their credit score. Non-conforming brokers understand that for most people, bad credit scores are a result of unfortunate life events and not irresponsible spending.
We hope we’ve answered your questions on ‘how to get approved for a home loan.’ If you’d like to chat to a mortgage broker Gold Coast and Brisbane wide, contact us and a member of our team will get in touch shortly.