Learn how to prepare for success
After years of hard savings, you’re ready to apply for a mortgage. Banks will require lots of personal information as they look for red flags about your ability to cover your mortgage each month. Many people find this the most daunting part of buying a property, but it doesn’t have to be. For a quick and successful application, all you have to do is to come prepared. In other words, learn to make yourself more ‘approvable’ before applying. Here are our top six tips from Aseem Agawal, Head of Mortgage at Global Finance Services.
1. Talk to an advisor
Banks have lending criteria that change day to day – making it almost impossible for you to know which to approach. A mortgage broker does, says Aseem.
“Mortgage advisors know which banks or lenders would work best for your circumstances and the requirements you’ll need to meet,” he adds.
With better information, the broker can advise you exactly where you may fall short and what to do to fix it. It also means you only fill out one application while they shop around banks for the best deal. This speeds up the process, and you’ll save yourself money long-term.
2. Keep your bank accounts in the black
While assessing your home loan application, banks and lenders will scrutinise the last three months of your bank account activity. They’re looking at how well you manage your money and if you can afford the mortgage repayments and potential interest rate hikes. Here’s what you should do:
• Check your credit rating. If you have any outstanding defaults, you’ll need to pay them before banks consider your application. Learn more about your credit score and where to check it here.
• Pay down personal debt. The less debt you have, the more chance you have of getting the mortgage you want. If you’re using your income to pay off debt each month, the bank will deduct that from your income when considering your application.
• Avoid excessive spending. Keep a close eye on your weekly spending. If you like splashing out on clothes, restaurants or travel, cut back for a few months so banks can trust you know how to be frugal.
• Find and fix dishonours. When you don’t have enough funds in your account to make an owed payment, it’s flagged as a dishonour. These will negatively affect your credit score, so avoiding them is best.
• Steer clear of unauthorised overdrafts. If money is taken out of your account and puts you into an unapproved overdraft, this will bring down your credit score.
3. Plan for additional expenses
Many first-home buyers save their deposit, only to fall short on unexpected purchasing costs. Aseem’s advice is to budget for those extras.
“Prepare for first-time success by factoring in legal fees, valuation costs, building reports and potential section costs early. They typically add up to around $2000–$3000.”
You’ll also need to ensure you can handle the increased homeownership expenses.
“Even though your mortgage repayments will be similar to what you were paying in rent, you will have additional expenses like maintenance costs, rates and home insurance. By including them in your budget before you apply for your mortgage, you’re more likely to be approved.”
4. Look for houses in your price range
Once you’ve uncovered an achievable budget for your mortgage, start seeking houses for sale in that price range. “Look online and connect with a few real estate agents in your area. It’s great to go to as many open homes and auctions as possible and compare the different values versus asking prices,” advises Aseem. After a while, you’ll be able to spot a winner quickly.
5. Understand the terminology
When starting your pre-approval process, you may feel bombarded with words you’ve never heard before. Aseem says understanding the jargon improves the confidence of first-home buyers.
“Taking the time to understand the terminology will make your mortgage application more straightforward.” Here are a few terms you’re likely to hear:
– LIM report – a summary of all the information on a property. You’ll see private and public stormwater and sewerage, property rates and potential risks, including erosion, subsidence, slippage or flooding.
– Sale and purchase agreement – a legally binding document to specify the terms and conditions that will guide the sale and transfer of your new home.
– Property title – a document to show who owns the property. This will include rights and restrictions of the title, such as the current mortgage, easement or covenant.
– Builder’s report looks for and outlines potential problems with the house. You must follow up on these issues with questions to the owner or more expert advice.
For other common terms you’ll come across when buying a new home, check out this glossary by REA.
6. Engage with a lawyer and insurance provider
Buying a home is a significant investment and comes with due diligence. Aseem says having a lawyer uncover potential problems and draw up the paperwork will safeguard your rights as a buyer.
“Onboarding a lawyer sooner rather than later will save time and ensure your investment is low risk.” Head of Insurance at Global Finance, Yamini Agrawal – Head of Insurance XXX, notes that people should also be thinking about sorting home and life insurance early – two to three weeks before they take over their new home. “Even though banks only require you to have home insurance, life insurance is not a luxury — it protects your loved ones against a huge debt.”
Setting up for success
Becoming a new homeowner is exciting – don’t let the dreaded mortgage application process get in your way. All the bank wants to see is that you have good financial habits and a stable income. The best way to save time is to forge a plan of attack with a trusted mortgage advisor before you start. With their insight, you’ll know precisely what red flags you must remove before applying. Ready to apply for a mortgage? Talk to the team at Global Finance on 09 255 55 00
The information and articles published on this website are true and accurate to the best of the Global Finance Services Ltd knowledge. The information given in articles on this website should not be substituted for financial advice. Financial advice should always be sought. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or their employees liable.