Yahoo Finance 4 tips Aussies need to follow if they want to score a home loan
From taking cash out at the ATM, to using your credit card, there are loads of potential red flags that could affect your borrowing power.
A mortgage broker has revealed four things you need to be aware of when it comes to buying a property. The ongoing cost of living and housing crises have made it feel nearly impossible to get on the property ladder.
While there is no way to magically get a home deposit in your bank account overnight, there are a few aspects that can affect your borrowing power. Tiimely Home lead broker Barbara Giamalis says the property industry has a lot of misconceptions that can get in the way of your journey to getting the keys to your castle.
From credit card history to buy-now, pay-later schemes, here's your how-to guide on how to have the best chance of getting a great home loan offer.
Do you have a story? Email stew.perrie@yahooinc.com
Credit cards can impact your borrowing power
Giamalis said she's come across a lot of Aussies who got a credit card because they thought it would show they have a good credit score and credit history.
But she said that's a huge myth and you don't need them.
“If you’ve got credit cards, try and pay them off and cancel them before applying for a loan because it gives you greater borrowing power," she said in a statement.
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"If you’ve got a $10,000 limit then we base it on the $10,000 limit, whether it’s on a $0 balance or not, so getting rid of credit cards makes a huge difference on servicing.
"I don’t dislike credit cards, I’ve got one myself but there’s good and bad credit, and it’s bad when you want to borrow the maximum.”
Act like you already have the mortgage
The mortgage broker revealed how vital it is to have your finances in check before you apply for a loan.
She said applicants can do some simple calculations to see how much they would need per month to afford their mortgage and other expenses. If they're not saving that much every month then the bank won't think they can handle the loan.
"If they’re borrowing $600,000, their payment will be $3,000 a month. It’s favourable to see that they’re saving $3,000 a month whether that be in rent and/or savings," she said.
"It shows a dedication and willingness to be able to pay your mortgage instead of ‘I’ll go out for the night and spend $500’, because you can’t do that once you’ve got a mortgage. A three-month saving history is a great way to prove this."
Gambling and ATM withdrawals can make or break you
Banks and financial institutions will be very keen on knowing what you do with your money and there can be some big red flags that could affect how much you can borrow.
If there are transactions related to gambling, then Giamalis said you will raise alarm bells for potential lenders.
“If a person is spending $200 a week on gambling, that comes into their living expenses, so on top of their basic living expenses, you’ve got an extra $800 a month that they’re gambling," she said.
"Cash withdrawals are another red flag because you don’t know where that money’s gone. If you’re going to an ATM regularly and taking our $1,000 a month, or $1,000 a week, which we often see, you can’t track where that money has gone. It’s better to have purchases that are traceable."
Thankfully, lenders won't really mind if there are some big, one-off purchases like furniture because they know these won't be regular transactions.
Using services like AfterPay need to be done wisely
Buy-now, pay-later services have been a big game-changer to the way some people purchase items. If you keep up with your payments then it shouldn't impact your home loan application too much, however if you're falling behind then it can damage your financial reputation.
But the Tiimely Home broker said you want to present yourself as financially stable.
"If an applicant is using buy now, pay later services more than what they have in their savings this could be a red flag and lenders could question whether they can afford a loan," she said. "Services like Afterpay also reserve the right to report negative activity (missed payments) on your credit history.
"Meaning if you miss payments this could impact your credit score negatively.“
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