A financial expert has provided Illawarra home buyers with simple steps to improve their chances of getting the mortgage they want.
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Banking and financial expert at comparethemarket.com.au, Rod Attrill said there have been positive signs for potential mortgage holders coming about, especially as we begin to see housing prices fall and interest rates cut.
"However, consumers need to be aware of what they will need beyond a deposit, in order to obtain a mortgage right now," he said.
"About 40 per cent of home loan applications were declined in December alone last year, with banks still looking more closely at the financial habits of borrowers, compared with what they did two to three years ago."
Here are some of his tips:
*Ensure your spending and savings patterns reflect your monthly loan repayment amount
Prior to getting a home loan, if you can show you can afford your future monthly repayments, lenders will have greater confidence in you as a borrower.
If your future monthly loan repayment will be about $4000 each month and you currently pay $2200 in rent, try to save an additional $1800 each month to demonstrate that you can pay your loan repayments once you have your mortgage and not be burdened by the debt.
*Discretionary spending
Some banks now go through customers' credit card transactions and bank statements to review spending habits, sometimes looking back through months of your financial history.
If you're someone who has regular, high discretionary spending balances - such as a high level of 'buy now, pay later' retail purchases, entertainment spending, and frequent restaurant transactions - you could be jeopardising your chances of getting a home loan if you don't have the cash flow to support it.
At least six months before you apply for a home loan, do a budget check-up and see if you can reduce your spending to only what's necessary.
*Look beyond the big four banks
Consider all your options - both applying for a home loan through a smaller lender, as well as through one of the big four banks. Smaller lenders such as start-ups, fintechs and neobanks often compete harder to get business and their competitive rates are recognised.
As a result, they may provide home loan options that bigger banks don't - such as longer loan terms, lower ongoing fees and lower interest rates.
Searching for rates that are competitive, especially with so much movement with these rates, is now critical.
Some of the banks are moving rates to the full 25 basis points while others are only going up to 18 basis points, so looking outside of the big four is now a must.
*Consolidate your debt
Having multiple debts can impact on your ability to repay a home loan and can make lenders wary of approving your application.
If you have two or more credit cards, consider consolidating them by transferring their balances to a card with a lower interest rate. If you have multiple personal loans, consider grouping these together into a single personal loan too.
*Be realistic about the property you're after
While it's easy to get carried away with wanting to buy your dream home, ensuring that the price is within reach will help your chances of getting a home loan.
Sit down and review your finances with an accountant to analyse how much you will be able to really afford on your property each month, without putting your household under financial stress.