7 Hot Tips to improve your chances of getting a mortgage or refinance approval
If your resolution is to get a mortgage any time soon, here are 7 things to think about that could definitely improve your chances of getting a mortgage or refinance approval on your existing home loan.
Sometimes, just getting through work and life can be enough of a slog without worrying about what is needed to buy a home or to simply refinance. But if buying a home or refinancing is top of your priorities, here is what you need to know.
How to improve your chances of getting a mortgage (or refinance)
1. Don’t lose sight of your debt
Now is a great time to pay down existing debts and avoid taking on any new ones. Year round sales might be tempting, but stop – think again. Getting your own home is now your number one priority. Or perhaps refinancing is a major priority for you to free up much needed cash flow or pay down your debt sooner.
Make sure you pay all your bills on time because lenders will always look very closely at your credit file. And they want to feel confident you can manage those home loan repayments.
2. It’s OK to check your credit score
A lot of people think that checking your credit report can harm your overall score. This isn’t true. There are two types of checks that can be made on your credit score.
To improve your chances of getting a mortgage by checking your own credit score as a ‘soft’ inquiry. This won’t affect your score. But giving a lender permission to check your report is classed as a ‘hard’ inquiry and does affect your score.
A ‘hard’ inquiry is only made once we have assessed and submitted the right loan the the most suitable lender. The advantage of using a broker is to open up more opportunities to access many lender types. This gives you the most suitable loan for your objectives.
Get a ‘soft’ credit inquiry to improve your chances of getting a mortgage (or refinance)
The Australian Securities and Investments Commission (ASIC) suggest an annual personal check, something you are entitled to do for free, to:
- Make sure that your name or date of birth are correct
- See if your address needs updating
- Check if any debt has been listed twice or whether the amounts are correct
- Have you have been recorded as missing any repayments
- Check whether someone might have stolen your identity to get credit. It can happen.
If anything isn’t correct – now’s the time to fix it. Have a look at where and how to check your score on ASIC’s Money Smart Website
3. Keep your documents safe and sound
When you do apply for a loan or refinance, the more information you provide, the better your chances of approval. So keep all the paperwork, things like statements for your loans and any credit cards, your savings records, as well as pay slips and your tax returns.
4. There’s more than one type of mortgage or refinance
Principle and interest or interest only? Fixed or variable? When you’re choosing a home loan it’s important to work out the features that will best suit you – and what each type of loan will cost you in fees. Again, we cover off all the different types of loans available and what you need to know or think about before you apply. The role as a broker is to find the most suitable loan for you.
Addressing all aspects and loan options such as:
- How to compare home loans
- Principal and interest loans
- Interest only loans
- Variable, fixed and split rate home loans
- Redraw, offset and line of credit
- Construction loans for building or renovating.
5. Don’t make any sudden moves during the buying process
Leaving a corporate job to start your own business or looking for a new workplace can be an exciting change, but it can affect your ability to borrow when you’re trying to get a home loan or refinance application. Starting a new business might mean an up and down cash flow at the beginning or that you don’t have the standard documentation traditional lenders like banks look for to assess your application.
If you are already your own boss, don’t worry – there are alternatives. Because it’s not always possible to provide all the up-to-date paperwork or proof of standard income required, some lenders have created what’s called an alternative documentation (alt doc) loan that you can check out.
6. Some savings are more ‘genuine’ than others
Lenders want reassurance you have the ability to save. They know that people who save more than 5 per cent of the purchase price in a savings account, shares or term deposit, are much more likely to pay back a home loan than people who don’t show they can save.
Most look for what they call genuine savings, so it’s a good idea to put all of your spare funds into a separate savings account and keep the regular contributions coming into it.
7. Get the right broker to find the right loan for you
Easing the pressure for you. The good news is there are lenders that look at the big picture and consider your individual circumstances as a whole, rather than reject an application based on a preset list of rules. So always check.
If the bank has said ‘no’, don’t give up yet. We have access to many different lenders that require less or different information in order to approve your loan. You do have options.
If you’d like more information talk to us today about how we may be able to put you with a lender that best suits your objectives and do all the hard work for you.
P.S. You can also read 7 Things a home buyer needs to know to be ready to enter the market
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.