12 things to do before applying for a home loan to maximise your chance of approval

What to do before applying for a home loanTwo questions tend to cause the most stress when looking for your new home: Will I get that dream home and will my home loan be approved?

There is only so much you can do to get the property you want, but there are things you can do to make yourself more desirable to a lender. These include checking your credit rating and being completely honest about your work and financial life. Lenders take all these things into consideration when making a decision about your home loan.

Here are some of the things you can do before applying for a home loan.

1. Conduct your own credit check

Every time you apply for a credit card or loan, the provider will run a credit check and get a copy of your credit file. To better prepare yourself for the home loan application process, conduct your own credit check to see what is on your credit file. If you have too many enquiries on your file, a lender will wonder why, and it may affect your home loan application. Knowing what is on your credit file will help prepare you to answer any questions your lender might have.

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2. Consolidate and organise other debts

Multiple debts will affect your ability to repay a home loan and could make lenders wary of taking a chance on you. If you have more than one credit card, you might want to look at consolidating your debt. Likewise, if you have a high credit limit that you don’t come even close to hitting, perhaps look at lowering your limit. If you have personal loans, consider consolidating them into a single personal loan or into your proposed home loan. All of this can demonstrate to lenders that you can easily repay your home loan, even if your situation changes.

Luke O’Brien, a mortgage broker with Aussie Home Loans, says high credit limits can harm your chances of approval.

“Credit card limits can be higher than an individual needs. Most people don't max out their credit cards, however, the limits are taken into account when looking at servicing,” O’Brien says. “Therefore, before going for a loan, people should reduce their limits and cancel credit cards that they don't use.”

Learn more about debt consolidation

3. Organise your finances

After you have sorted your debts, you’ll need to look at your other finances to make sure you are putting your best foot forward when you apply. Make sure that you have a good savings history and a safety net should something go wrong. Regular deposits into your savings account demonstrate to a lender that you have stability and can maintain payments for a prolonged period.

4. Stay on top of obligations

You should also make sure that your transaction accounts, credit cards and any other accounts you have are in order with no missed payments or overdrawn periods. A lender will typically ask for six months of statements to review. If you are self-employed, make sure all your taxes and other financial obligations are up to date and in order.

O’Brien points out that blemishes such as “previous defaults and declined applications for credit cards along with numerous enquiries around credit cards or personal loans” can all impact your credit score.

5. Organise and prepare your paperwork

You will have to provide paperwork when you apply for a home loan. It is always best to have your documents prepared in advance, so you don’t delay the loan application process.

Most lenders require the following paperwork:

  • Six months of bank statements of every bank account you have
  • Last three to four payslips (for PAYG employees)
  • Last two years of tax returns (self-employed or contractor)
  • Details of other loans, such as the amount, repayments and length. Have statements to illustrate your repayment history
  • Credit card details, limits and repayments for all cards

The documents you’ll need for a home loan

6. Show stability in your life

Lenders like to see that you have stability. If you are considering a major life change, such as switching careers or starting your own business, it may be best to reconsider until you have your home loan. Most lenders won’t look at your application if you are still under probation at work, and most prefer at least 6-12 months of employment at the same company or industry.

If you have just started your own business, you may also face obstacles getting a home loan. While there may be lenders that will accept your application, you may need to wait until you can show some positive cash flow.

Stability isn’t just about your work life. If you are presently renting, lenders will look for stability in your rental history as well. Rental references and documentation showing timely rental payments will help you look favourable to a lender.

7. Stay on top of your expectations

We all want that dream house with the garage and big backyard, but it’s important to be realistic about your expectations. Before applying for your home loan, look at recent sales data for the area you’re interested in and for the type of property you’ll be trying to buy. Also check how much you can actually borrow by using a calculator that will take into account all your expenses and your earnings.

If you have a concrete idea of what you can actually afford and what it will buy you, you will be better prepared for when the lender does their own assessment and offers you your loan. It also means you will be less likely to overborrow and overextend yourself, leading to financial issues in the future.

8. Know your position and situation

Your personal circumstances also affect the types of loans available to you. Are you self-employed or are you classed as a PAYG employee? Are you applying by yourself or as part of a couple or with a guarantor? Do you have bad marks on your credit history? All of these factors can affect the types of home loans that you may be able to get.

9. Save for a rainy day

You’ll also need to set money aside for the other up-front costs associated with a home loan, such as stamp duty, solicitor fees and other costs. It also helps to have a small amount put aside for the costs associated with looking for a property, such as pre-purchase inspections and moving costs.

10. Tell me more

The old adage honesty is the best policy is especially true when applying for a home loan. Tell the lender or your broker about any finance-related mishaps, no matter what they may be or when they happened. Your credit file will show any defaults or declined applications, so your lender will find out anyways. Being up-front allows you to prepare for any questions a lender might have about your credit history.

11. Compare loans before you apply

There are hundreds of home loan options out there, so do some research before you apply for any home loan. Look at your circumstances and then do your research, compare the options that are available to you and then go through the application process.

One important reason to prepare for your home loan application is that all applications and denials will be recorded on your credit file. These will then negatively impact your next application.

Learn how to compare home loans

12. Speak to a professional

With so many options in the market and so many factors determining whether your application is approved, it can sometimes help to speak to a mortgage broker or financial advisor. A financial planner can help you organise your finances before you apply, while a mortgage broker can assist with the actual application process. A mortgage broker will make sure you have all the appropriate paperwork in order before the application is lodged and take you through the application process step-by-step.

Make sure you are putting your best foot forward when applying for a home loan by making sure you have everything in order. Do this and you’re more likely to get that approval straight away.

Compare loans and get the best deal when you're ready to apply

Rates last updated May 27th, 2018
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Loan purpose
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.69%
3.69%
$0
$0 p.a.
80%
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.64%
3.67%
$0
$0 p.a.
80%
A mortgage with a competitive variable rate, limited fees and plenty of flexibility.
3.52%
3.53%
$0
$0 p.a.
80%
Go from application to approval in as little as 20 minutes with a variable rate loan from this innovative online lender. Add a 100% offset account for $10 a month.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.64%
4.03%
$0
$395 p.a.
80%
New borrowers or refinancers from another lender get a discounted rate with this package loan.
3.54%
3.58%
$0
$0 p.a.
80%
Eligible borrowers can get $900 cashback on this loan with a 100% offset account and a redraw facility.
3.64%
3.84%
$0
$0 p.a.
70%
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
Get a 100% offset account to save on interest charges, and pay no application fee.
3.69%
3.71%
$0
$0 p.a.
80%
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
3.70%
4.13%
$0
$395 p.a.
90%
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
3.79%
3.79%
$0
$0 p.a.
80%
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan.
3.96%
3.98%
$0
$0 p.a.
90%
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
3.79%
4.06%
$0
$20 monthly ($240 p.a.)
80%
Add a Platinum Rewards Mastercard with this package loan and you could earn 150,000 Bendigo reward points (Victoria only, terms and conditions apply).
3.77%
3.81%
$200
$0 p.a.
95%
A simplified mortgage with a low interest rate and a redraw facility.
3.69%
4.06%
$0
$349 p.a.
90%
Package your loan with other AMP products and save on rates and fees.
3.68%
3.69%
$0
$0 p.a.
95%
This variable rate loan offers flexible repayments and a redraw facility. Available with a 5% deposit.
3.49%
4.49%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.
3.68%
3.69%
$0
$0 p.a.
90%
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
3.65%
3.66%
$0
$0 p.a.
80%
This special rate loan comes with no application or ongoing fees, and offers a flexible repayment schedule.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.69%
4.09%
$0
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
3.69%
3.74%
$600
$0 p.a.
80%
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
3.78%
3.78%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
3.87%
3.87%
$0
$10 monthly ($120 p.a.)
90%
Get Virgin Velocity Points at settlement, monthly and every three years, plus the option to make up to $10,000 a year in extra repayments.
3.79%
3.83%
$600
$0 p.a.
80%
A low interest rate loan with limited fees and a redraw facility. Principal and interest repayments only.
3.73%
3.73%
$0
$0 p.a.
80%
Get a 100% offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
3.89%
3.89%
$0
$0 p.a.
70%
Investors with a 30% deposit can get this low rate property investment loan.
3.62%
3.62%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
3.59%
3.99%
$0
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.69%
3.94%
$0
$248 p.a.
70%
Get a sharp rate and a 100% offset account. Borrowers must have a 30% deposit.
3.99%
5.17%
$600
$0 p.a.
90%
Competitive rates for fixed for 3 years with redraw facility.
3.59%
4.14%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.85%
4.05%
$0
$350 p.a.
95%
This high LVR fixed rate loan allows you to borrow up to 95% of the value of the property you're buying.
4.15%
4.76%
$600
$0 p.a.
90%
A competitive rate with no ongoing fee and borrow up to 90% LVR.
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.74%
4.01%
$395
$0 p.a.
80%
A competitive 3 year fixed rate with no ongoing bank fees.
4.50%
4.82%
$600
$0 p.a.
90%
A variable interest-only loan to fund your investment. Get this loan with a 10% deposit.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule.
3.74%
3.74%
$0
$0 p.a.
90%
New customers can get a discounted variable rate and a fee-free redraw facility. NSW, QLD and ACT residents only.
4.14%
4.14%
$0
$0 p.a.
80%
Investors pay no application or ongoing fees on this loan from an innovative online lender.
3.89%
4.87%
$0
$0 p.a.
90%
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
3.99%
4.86%
$0
$0 p.a.
80%
Access a fee-free 100% offset account and pay no application or ongoing fees.
3.69%
4.47%
$0
$395 p.a.
90%
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
3.99%
3.99%
$0
$0 p.a.
80%
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).
4.09%
4.79%
$0
$395 p.a.
90%
Buy your investment property and set your repayments for the first year. Available with a 10% deposit. Available in QLD, NSW and ACT only.
4.14%
4.81%
$0
$0 p.a.
80%
Pay no application fees and access a fee-free redraw facility with this fixed rate loan.
4.24%
4.60%
$0
$0 p.a.
90%
Fix your investment repayments for 1 year. You can get this loan with a 10% deposit. Available in QLD, NSW and ACT only.
3.99%
4.02%
$0
$0 p.a.
80%
Investors can enjoy flexible repayment options and pay no application or ongoing fees.
3.85%
4.82%
$600
$35 monthly ($420 p.a.)
90%
Make up to $10,000 in extra repayments per year and take advantage of a flexible repayment schedule.
4.09%
4.12%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Points on your mortgage (for a limited time, subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
3.79%
3.80%
$0
$0 p.a.
70%
Keep your LVR at 70% or below and enjoy a special discounted rate. Also, pay no application or ongoing fees.
3.89%
4.96%
$0
$395 p.a.
95%
Refinancers can get $1,500 cashback. Conditions apply. Package your home loan with a Qantas rewards earning Amplify credit card.
3.99%
4.03%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and pay no application or ongoing fees.
3.89%
4.97%
$0
$395 p.a.
95%
Get discounts on a range of Commonwealth Bank products and enjoy the option of fee-free extra repayments during the fixed term.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Borrow up to 95% and lock in a 3 year fixed rate. Access your account via internet and phone banking.
5.29%
5.64%
$995
$15 monthly ($180 p.a.)
65%
Available for former bad credit borrowers who have had a clean credit file for the last 24 months. Available for purchase or refinance.
3.59%
4.42%
$600
$0 p.a.
95%
Get a 1% discount for the first two years of your loan and pay no application or ongoing fees.
3.64%
3.65%
$0
$0 p.a.
95%
Family pledge option available. Get a special discount off Bank of Melbourne's basic variable rate.
3.89%
4.88%
$0
$395 p.a.
95%
Refinance from your existing loan and get a $1,250 rebate. Terms and conditions apply. Plus get discounts on a range of Westpac products.

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Important Information*
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupied Variable P&I Rate — borrowing $700,000 or more

Pay no application or ongoing fees and get access to a redraw facility and flexible repayment schedule. Refinance to a UBank loan and you could get $1,000 in your USaver account (offer conditions apply).

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier, P&I)

New borrowers or refinancers from another lender get a discounted rate with this package loan.

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