Will your bank lend you money for a home loan?


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Oct 8, 2010( 2 min read )

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Are you considering applying for your first home loan? It can be a nerve-racking time looking over your finances, worrying about your credit rating and considering whether you can actually afford the monthly repayments. It’s a big commitment but if you understand the lending criteria you can put your mind at ease and come prepared when you sit down to apply for a home loan.

What is the home loan lending criteria?

Lending criteria are the conditions put in place by your financial institution which specify whether you are eligible to apply for a home loan.

The lending criteria will be different for each financial institution and will depend on a number of factors such as the economic market, the size of the institution and what products they offer.

Here are some common lending criteria that lenders will consider when reviewing your application:

  • A minimum deposit amount required based on the loan-to-value ratio (LVR) of the loan. The LVR is what percentage of the purchase price of the property you can borrow and how much deposit is required.
  • Savings history or previous repayment history for a certain amount of time.
  • How much you earn and if you work full-time or not.

If you meet the lending criteria, your lender will then calculate how much you can to borrow. It is then up to you to work out how much you can comfortably afford to borrow and make in repayments. Don’t overstretch yourself and make sure you factor in interest rate rises.

To give you an idea of what your home loan repayments may look like, use the RateCity mortgage repayment calculator. If you want to shop around for a competitive Australian home loan get started with the home loan comparison tool that compares thousands of home loans in one place.

 

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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