April 4, 2011
Applying for your first mortgage can be an overwhelming process, with all of the paperwork and documentation required by a financial institution. So to give yourself the best chance at approval and to maximise the amount you can borrow, it’s worth taking the time to get your affairs in order first.
Here are few tips and tricks to get you into your new home sooner rather than later and with minimal application heartache.
Paperwork: mountains to molehills
In the current lending environment, there’s no such thing as providing lenders with too much information. The more financial information you can gather about yourself the better – think pay slips, credit card and other bank statements, tax returns and evidence of savings. If you’re self-employed you’ll require balance sheets, tax assessments and profit-and-loss statements too.
It’s not uncommon for lenders to request additional information during a mortgage application process, even if you have met their initial documentation requirements, so having everything at hand will accelerate the process.
One common mistake made by potential borrowers is not having up-to-date financial records to prove their income. So it’s vital that you tick all of the boxes, such as completing tax returns on time, before you apply for a mortgage.
Clean financial slate
Once you’ve got your paperwork in order it’s time to rein in spending and get your debt levels in check. This can including minimising personal loans or the number of credit cards you have as well as your credit capacity. Because when most lenders assess your ability to repay a home loan they assume any credit card will be drawn to its limit. So reduce your credit limit by as much as possible to maximise approval success.
You’ll also need to have a squeaky-clean credit record, so be diligent in paying any outstanding money and utility bills or establish a high-interest savings account and make regular deposits.
A detailed budget will help you to determine how much you want to borrow and how much you can afford to borrow. So by taking the time to plan your finances you’ll get a realistic assessment of your cash flow.
Shop to save thousands
Then go online to a financial comparison site such as RateCity to get a better understanding of how much deposit you’ll need to finance your dream home and compare mortgage options, which best suit your financial needs.
By comparing home loan options online you can potentially save hundreds, even thousands, of dollars over the life of your loan and the easiest way to do this is by comparing interest rates.
However, you’ll likely save even more if you weigh up fees and charges, fixed versus variable options, introductory rates and a string of features including offset accounts, construction facilities, mortgage portability and redraw facility, to name a few. And if you’re reading this now, then you’re already on your way!
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