Avoid mortgage application traps and gain quick approval

Avoid mortgage application traps and gain quick approval

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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Why is it important to get the most up-to-date information?

The mortgage market changes constantly. Every week, new products get launched and existing products get tweaked. Yet many ratings and awards systems rank products annually or biannually.

We update our product data as soon as possible when lenders make changes, so if a bank hikes its interest rates or changes its product, the system will quickly re-evaluate it.

Nobody wants to read a weather forecast that is six months old, and the same is true for home loan comparisons.

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

What is appreciation or depreciation of property?

The increase or decrease in the value of a property due to factors including inflation, demand and political stability.

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

How much information is required to get a rating?

You don’t need to input any information to see the default ratings. But the more you tell us, the more relevant the ratings will become to you. We take your personal privacy seriously. If you are concerned about inputting your information, please read our privacy policy.

How often is your data updated?

We work closely with lenders to get updates as quick as possible, with updates made the same day wherever possible.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

What is the flexibility score?

Today’s home loans often try to lure borrowers with a range of flexible features, including offset accounts, redraw facilities, repayment frequency options, repayment holidays, split loan options and portability. Real Time Ratings™ weights each of these features based on popularity and gives loans a ‘flexibility score’ based on how much they cater to borrowers’ needs over time. The aim is to give a higher score to loans which give borrowers more features and options.

Mortgage Calculator, Property Value

An estimate of how much your desired property is worth. 

What is a specialist lender?

Specialist lenders, also known as non-conforming lenders, are lenders that offer mortgages to ‘non-vanilla’ borrowers who struggle to get finance at mainstream banks.

That includes people with bad credit, as well as borrowers who are self-employed, in casual employment or are new to Australia.

Specialist lenders take a much more flexible approach to assessing mortgage applications than mainstream banks.

Does each product always have the same rating?

No, the rating you see depends on a number of factors and can change as you tell us more about your loan profile and preferences. The reasons you may see a different rating:

  • Lenders have made changes. Our ratings show the relative competitiveness of all the products listed at a given time. As the listing change, so do the ratings.
  • You have updated you profile. If you increase your loan amount, the impact of different rates and fees will change which loans are the lowest cost for you.
  • You adjust your preferences. The more you search for flexible loan features, the more importance we assign to the Flexibility Score. You can also adjust your Flexibility Weighting yourself, which will recalculate the ratings with preference given to more flexible loans.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?