When it comes to buying your first home, it pays to be well prepared. Here are 4 helpful tips that will help you get your first home loan.
Reduce your debts
Knowing much how outstanding debt you’ve got, along with the associated minimum payments, can play a huge role in a mortgage approval. Put simply, the less debt you’ve got, the more you’ll be able to afford on your given salary, all else being equal. It can actually be a win-win to pay down debt prior to a mortgage application because it’ll boost your purchasing power and probably increase your credit scores at the same time.
Slow down the spending
Avoiding unnecessary swiping and tapping weeks and months before applying for a home loan can have a big impact. There is extra scrutiny now on expenses and keeping spending under control can demonstrate your ability to make your loan repayments. It would be silly to make a small or medium-sized purchase that jeopardize your very large home purchase. Best to just wait and make your purchases later, once you have your home loan and know how much you can afford each month.
Organise Your Savings
You’ll need your savings available for your deposit, settlement costs and a buffer once you purchase your home. At the time of your loan application you will need to be able to show up to three months of bank account statements where you have your savings.
To make it simpler for yourself, it may pay to consolidate all your savings into the one account at least three months before you apply for your home loan.
Test your ability to make home loan repayments
You may be renting and saving well right now. When your first home loan payment comes out of your account it may be a small shock for you if you’re not prepared. A good idea is to ensure you can make the loan repayments well before you take out the loan. So, if you are paying rent of $400 per week and your proposed new loan will be $500 per week, get in the habit of putting the extra $100 direct into your savings account and don’t touch it. You’ll quickly see how comfortable you are at making the payment plus your savings will go up fast.