Unless you are lucky, taking on a mortgage is the only way you will be able to afford a home. This path to landlord is well-trodden ground, with all homeowner hopefuls having to save for a deposit, apply for a home loan and cross their fingers that they are approved.
Before you rush out and research variable home loan rates, realize that there are many ways to increase your likelihood of being approved for your dream home. Not only will these basics boost your chances of success, but they will save you money in the long run.
Know thyself
Knowing your spending habits will go a long way when applying for a home loan. Setting up a proper budget and knowing exactly what your flow of cash looks like is important in normal life, and vital when taking on such a large loan as a home loan. Handy tools like a home loan calculator will help you get the bigger picture and help you make informed decisions.
The more you save, the more you save
When applying for a home loan, you will need to have a deposit saved up. The minimum amount required for a deposit is usually ten percent of the property value. Saving up such a chunk of money is a feat in itself but it is made a lot easier if you have made saving a habit.
The more money you can save for a deposit, the less you have to pay back with interest.
A demonstrated ability to save and manage money goes a long way when determining the success of your home loan application. If you are a saver, your lender will view you as a safer prospect and potentially offer you a lower interest rate.
All lenders aren’t created equal
The home loan market is incredibly competitive, and rules seem to change quickly. Spending time here in the research stage will pay huge dividends later on. Make a quick home loan comparison, and you can see the wildly different rates and a lot of fine print. All lenders have to be compliant with the government, so make sure you know exactly who you are dealing with before you take the plunge.
Some lenders offer seemingly low-interest rates only to increase them in 12 months. Be very wary of ‘honeymoon” rates and deals that seem too good to be true; they usually are. Once you have been approved, don’t be afraid to do a health check on your loan each year, as refinancing your home loan and swapping lenders can be a good move in certain circumstances.
Getting approved
Getting approved can be a big challenge, especially if your financial history isn’t great. Being rejected is heartbreaking so take some steps to ensure your success. Lenders feel better dealing with someone who has a proven ability to save and manage money. If you haven’t developed a strong credit rating, now might be the best time.
Other factors can affect the outcome of your application too. Outstanding debts can cripple an application, so make sure you are aware of any debts you might have. Long term employment and residence are big ticks for a lender when assessing a home loan application.
The road to homeownership usually starts with a home loan, and if you want one, you will have to be approved. Asses yourself and your financial situation, are you, someone, you would lend money too? Hard questions like this can be a reality check, rectifying your personal credit history will save hassles later. Remember to keep grounded and save as much as you can. Be wary of some lenders and do your research before locking yourself into a loan. By following these basics, you are sure to find success and realize your dream of owning your own home.
