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 February 23rd, 2018
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.59%
3.60%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.52%
3.54%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.49%
4.49%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.52%
3.53%
$0
$0 p.a.
80%
A competitive variable rate product with no application or valuation fees offered by a 100% online lender.
3.64%
3.67%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.69%
4.86%
$0
$395 p.a.
90%
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.54%
3.58%
$0
$0 p.a.
80%
A variable rate home loan with competitive rate, redraw facility and offset account.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application fee or ongoing fees with this loan.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.64%
3.67%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.69%
3.69%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.77%
3.81%
$200
$0 p.a.
95%
A basic home loan with a low interest rate and a redraw facility available.
3.65%
3.66%
$0
$0 p.a.
90%
A competitive variable rate home loan with no application fee.
3.59%
3.96%
$0
$349 p.a.
90%
A variable package loan for a larger loan size with no monthly fees.
3.74%
3.75%
$0
$0 p.a.
80%
A special variable rate home loan with no application or ongoing fees.
3.62%
3.62%
$0
$0 p.a.
80%
A discounted, competitive variable rate loan with limited fees.
3.99%
4.00%
$0
$0 p.a.
80%
A low-fee variable rate investor loan with a fast online application process.
3.74%
3.77%
$0
$0 p.a.
90%
A home loan with a special rate for owner occupiers. Free offset account.
3.69%
3.69%
$0
$0 p.a.
80%
Enjoy a low variable interest rate and no application or ongoing fees.
3.99%
4.41%
$0
$395 p.a.
90%
A discounted home loan variable rate that comes with a competitive package, an eligible credit card and an offset transaction account.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.99%
3.74%
$0
$0 p.a.
95%
Fix your rate for two years with this competitive, low-fee loan. No offset account available.
3.68%
3.69%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.94%
3.71%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.89%
5.40%
$0
$395 p.a.
95%
A package investment loan with a competitive, discounted interest rate and 0 application fees.
3.74%
3.74%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans
require no LMI and no deposit. NSW, Qld and ACT only.
3.64%
4.03%
$0
$395 p.a.
80%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
4.19%
4.21%
$0
$0 p.a.
80%
Loans.com.au offer a low interest variable home loan with no application fee.
3.69%
3.71%
$0
$0 p.a.
90%
A discounted interest rate home loan with no monthly fees.
4.09%
4.12%
$0
$0 p.a.
95%
This loan has a high max insured LVR, making it an option for low deposit borrowers.
3.78%
3.78%
$0
$0 p.a.
80%
A basic low-rate home loan that still offers some useful features.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
4.09%
4.12%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
3.99%
4.02%
$0
$0 p.a.
80%
An investment loan with a competitive interest rate and no ongoing fees.
4.14%
4.14%
$0
$0 p.a.
80%
An investment home loan with competitive rate and 100% offset account.
3.85%
4.82%
$600
$35 monthly ($420 p.a.)
90%
Low fixed rate offer from HSBC. Reverts to a discounted variable rate after the initial term.
4.29%
4.32%
$0
$0 p.a.
80%
An interest-only loan for investors. Access equity to further your investment opportunities.
4.19%
4.59%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
3.89%
4.87%
$0
$0 p.a.
90%
Enjoy a low interest rate and borrow up to 90% (with LMI) of your property's value.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.99%
3.99%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.97%
3.97%
$0
$0 p.a.
90%
A competitive variable rate home loan with no ongoing fees.
4.09%
3.79%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
3.88%
4.88%
$0
$395 p.a.
95%
Refinance from your existing loan and get a $1,250 rebate. Lock in a discounted fixed rate with a low service fee.
4.34%
4.87%
$0
$0 p.a.
80%
Lock in a low 2-year fixed rate with this interest-only investment loan.
3.69%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW, QLD and ACT residents only.
3.84%
4.83%
$0
$0 p.a.
80%
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.59%
4.42%
$600
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$0
$0 p.a.
90%
Get a low variable rate along with some important basic features.
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.99%
4.77%
$0
$0 p.a.
80%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.64%
3.65%
$500
$0 p.a.
95%
A basic home loan with a promotional variable interest rate.
4.11%
4.01%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate investment loan.
3.79%
3.80%
$0
$0 p.a.
80%
A competitive rate with no ongoing monthly fees or application fees.
3.87%
3.87%
$0
$10 monthly ($120 p.a.)
90%
Get a competitive interest rate for 3 years and a discounted variable rate when the fixed period ends.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.69%
3.69%
$0
$398 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
3.99%
4.03%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Borrow up to and fix in a 3 year home loan 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. Loan can be used to purchase a property or refinance.

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