Getting match fit: how to prepare for a mortgage

Buying your first home can be an exciting but also nerve-racking experience. Traipsing from home inspections to auctions can be time-consuming and traumatising, bank-speak can be mind-boggling and the paper work seems endless.

Never fear - there are simple, practical tips you can use to make applying for a home loan a hassle-free affair.

The basics
Before you approach a bank or lender to discuss your borrowing power, you must ensure you are an attractive borrower. That means you must have a solid credit score, a stable work history, genuine savings and a respectable deposit.

Your credit history is perhaps the most crucial factor in determining whether you are approved for a home loan or not. If you are late paying your bills or rent, even by a couple of days, lenders will doubt your ability to pay your mortgage on time. 

Apart from ensuring you have a strong record of paying bills on time, you should also avoid applying for too many personal loans or credit cards in the 12 months before applying for a home loan. Lenders view too much debt as a likely impediment to your ability to meet your mortgage repayments.

For this reason, it is also a good idea to cancel any excess credit cards and limit yourself to one card.

The documents

As with any other loan application, you will need to provide a certain amount of information to your chosen lender when applying for a home loan. For starters, you will need to prove your identity with 100 points of ID, the likes of a driver's licence, Medicare card and ATM card.

While these are cards within easy access in your wallet, you will also need two or three recent payslips. If you are self-employed, you will need two years' personal tax returns and two years' company tax returns.

Other documents to gather together include the most recent statement of your debts (credit cards, personal loans) and three months' bank statements demonstrating you have been saving your deposit.

The checklist
For a hassle-free home lean application, stick to this pre-mortgage checklist:

• Ensure your credit cards, mobile phone and utility bills are under control and paid on time.
• Don't change jobs in the two years before you plan to apply for a home loan.
• Keep all necessary documents together, including credit card statements, payslips and tax returns.
• Research various lenders and the types of loans they offer - on RateCity you can research and compare more than 2000 home loans.

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