24 Mar Tips to get your home loan pre-approved.
So, you’re thinking about buying a home? Congratulations! Buying your first home is an exciting process – but it can also be daunting. A house is often the biggest purchase of our lives, and a mortgage is typically our biggest financial commitment. Check out my tips and tricks on how to get your home loan pre-approved so you can start hunting for your dream home:
Do you have a clean credit history?
During the application process, lenders will use your credit history as a strong indicator of your ability to manage a home loan. Any personal debt you have will reduce the amount the bank will lend you for a home. While any overdue debts stay on your credit file for five years, your credit file can be updated if you pay out the balance of your debt. It’s vital you do as much as possible to clear any outstanding debt, as lenders will want to see what actions you’ve taken to address any credit issues.
Don’t cancel your good credit card
If you’ve got a good record of paying off your credit card balance in full but are now focused on saving, don’t cancel your card. That repayment history is giving your credit score a healthy glow.
Show that you’ve been saving
Lenders like to see that you have the discipline needed to make regular savings, so showing them you have a good savings pattern will give you an upper hand in the mortgage approval stakes. By demonstrating a regular and consistent savings history, you’ll be showing lenders that you have the ability to manage your finances accordingly.
Your deposit matters.
The size of the deposit you have saved up will be a major determining factor of your ability to get pre-approval. The bigger the deposit, the more favourable the lender or bank will view your application. As a general guideline, a down payment of 20% of the property’s purchase price is needed to get the best mortgage rates. Loans with less than 20% are considered a higher risk to the lender than those with a larger deposit, so they will likely carry a slightly higher interest rate.
Each lender has its own criteria for approving home loan applications, so it’s worthwhile shopping around if at first you get a no. Remember, though, that too many applications in a short timeframe can negatively impact your credit report if you’re being turned down for each application. Consider working with a mortgage adviser, it is free, and they can help you navigate the home loan process!