5 things to do to when applying for a home loan
by The Advantage
3 June 2020
If securing a loan for your dream home is one of your financial goals, you might be feeling a bit overwhelmed. Whether the loan is for your first home or an investment property, the ‘to do’ list in front of you can feel never-ending.
While the task of getting a home loan may feel intimidating, it helps to break the task into manageable steps. In this article we explore five things to consider when applying for a home loan.
1. Know what you can afford
It’s important to set big financial goals. But they also need to be realistic.
When setting your sights on property, you need to know a few crucial budgetary things. These can include:
- How much you’ve saved for a deposit
- Your borrowing capacity
- Your credit score.
Knowing how much you have saved is vital to determine what types of properties you can afford. Similarly, your borrowing capacity will often come down to your employment type and status. Most lenders will look at the length of time you’ve been employed, and if you’re a permanent worker, contract or self-employed. Finally, your credit score will also affect what you can borrow. Your score is based on a variety of factors including: outstanding debts, credit history, payment history and credit types.
2. Get your finances in order
If your finances aren’t where they need to be, then you’ll need to get them in order. Having your finances under control can go a long way to securing a home loan.
A major part of financial planning is debt management. Lenders will be looking to see you can handle the payment schedule that comes with a mortgage. It’s a good idea to settle your outstanding debts before you apply for a home loan – this includes repaying your existing debs and limiting your credit card usage.
3. Organise your paperwork
Applying for a home loan requires a lot of important paperwork. This includes, but isn’t limited to:
- Legal identification (e.g. a driver’s license or passport)
- Bank statements
- Recent credit card and personal loan statements
- Payslips from your current employer
- Two years of tax returns if you’re a contract worker or self-employed.
It pays to get ahead and have these documents ready to go. That way, you can be sure you’ve got all the legal bases covered when you do apply for a loan.
4. Engage a reliable broker
Securing the right home loan can take a lot of hard work and negotiation. While you can go it alone, there are experts out there who can take a lot of the burden off you.
A mortgage broker is essentially a link between you and your potential lender. They can help assess your financial situation, advise the best loan to suit your circumstances and help you to secure the right loan.
Using a reliable broker can help you to get the right loan more quickly than if you were to do it by yourself.
5. Assemble a strong financial team
Applying for a home loan can be tricky. If you feel like you would benefit from some expert advice, the team at Advantage Consulting is here to help. Our financial experts can assist with debt management and financial goal setting, helping you to plan ahead for a stronger future. Talk to the team at Advantage Consulting today about your home loan planning options.
Disclaimer: This is general advice and has been prepared without taking into account your particular situation or needs. You should consider whether it is appropriate for you before acting on it.