Three tips from Marissa Schulze, mortgage broker, property developer and director of Rise High Financial Solutions.
Tighten up your spending
The most important thing for applicants of low deposit home loans is to review their living expenses and if they can, to tighten up their spending. Applicants should rein in their spending for the six months prior to applying for the loan.
Genuine savings and rental history
Some lenders like to see "genuine savings". That means the applicant has been consistently saving each month or fortnight to build up their savings bucket. If that's not the case and they've been given the deposit as a gift from parents then lenders often want to see that sum of money sitting in the applicant's account for three to six months before applying.
If the applicant is renting they can actually prove they have good rental history and use that to boost their application in place of genuine savings. Now that really only works for applicants who are actually renting through a property manager. Sometimes applicants renting from a private landlord will find that hard for the bank to accept. The banks trust the feedback from a property manager more than they would from a private landlord.
Don't make any big changes between pre-approval and settlement
Make sure your financial circumstances don't change from the time you apply for finance to at least settlement. A common mistake is that buyers get pre-approval and then quit their job or apply for a car loan or increase their credit card limit. People don't realise how that impacts their application. You need to keep your financial and employment situations stable from the time you apply until you settle and move in. Then you can do what you like.