While interest rates are low, the property market in parts of the country is red-hot, which means that would-be home buyers need to maximise their borrowing capacity if they want to buy their dream home.
Here are some tips that will boost your borrowing powers:
- Know what the banks know
The first thing any lender will do when they receive your loan application is check your credit file. This combines details such as your employment history, how often you have moved around and how often you have applied for any sort of loan.
Some lenders pay more attention to your credit file than others and that’s why important to know what is in your credit file – which you can do via mycreditfile.com.au. After all, if you have a weak credit file, there is no point in applying to a lender who attaches the maximum importance to your credit file.
- Pay your bills on time
One of the biggest determinants of your credit score is your repayment history; companies such as Telstra and the power utilities all report on how good you are with your repayments. Once upon a time, they just gave you a black mark when you missed payments. But now you get bonus points on your credit files for prompt payments. So the message is clear, if you want to boost your credit score, the earlier you pay your bills the better – you may even want to arrange direct debits so that you don’t have to think about repayments.
- Reduce credit cards
It may boost our egos when the banks offer to increase our credit card limits. But this can also reduce the amount the bank will lend you for your home loan. Let’s say you have a credit limit of $25,000 on your credit card, the bank will deem that this $25,000 has already been lent to you – as a result they will reduce how much they will lend you. Ask yourself, do you really need so many cards or such a high limit?
- Don’t touch your savings
The banks like to see customers who diligently add to their savings – if you are reliable with your savings, then it’s highly likely you will be reliable making home loan repayments. Even if you are only saving $50 a week, the banks prefer it to someone who has an inconsistent savings pattern.
- Don’t shop around
Every time you apply for a loan, it has an impact on your credit file – whether or not you go through with the application. So, even if you are tempted to shop around between the banks to see what’s the best deal you can get – don’t.
A good mortgage brokers know what is the best loan for their clients – avoiding you the need to shop around.
- Tell the truth
Sometimes, when a bank looks at you, the assessor may identify some behaviours that gives them concern. This could be a record of late payments, or it could be frequent changes of employer. Working with your broker you can often head these concerns off at the pass if you are upfront from the start. For example in the first example if you have a job which involves international travel, it may be understandable if you are late with a couple of payments. Similarly, an assessor will be understanding if you have changed jobs so often because of matters out of your control such as retrenchments.
Forewarned is forearmed – and organised broker can pre-empt any bank concerns to get your home loan through.