Calling all first home buyers out there! If you are thinking about getting into the property market and getting approved for a home loan this is one of the key criteria the banks will scrutinise. How you run your bank accounts. What might seem irrelevant to the client can sometimes be make or break for getting an approval from the lender. Especially if you are a borrower with less than a 20% deposit. But either way, the banks will still look closely into your bank statements.
Creating a Clean Slate
The banks have become very pedantic due to the responsible lending code legislation. They will start by making sure that the expenses you have declared in your mortgage application match your bank account statements. I would physically go through your bank account statements and do the calculation before declaring it on the application form.
Most people tend to underestimate what they are actually spending each week or month and when they actually work it out the figure can be quite a bit different from what they first thought. Even if it is not exact, it is important that it is realistic and in line with what you declare.
Overdues and Overdrafts
Now for the more serious issues we face with getting the loan approval. Late payment fees, automatic payments or Direct debits that have bounced and unarranged overdraft fees. These can be the make or break of an approval so it is important that you actively manage your accounts the best you can to make sure these things do not happen. If you are running your accounts proactively and ensuring that none of the above things happen then you are in a stronger position in the eyes of the lender.
We can work with our clients over a three to six-month basis helping coach people to be prepared when it comes to keeping their statements clean and avoiding any missed payments before the application is submitted to the lender. We want to give you the best chance at getting that approval.
Credit Card Crunch
Any mortgage broker will also ask you if you have any credit cards. Even if you pay your credit card off each month, when it comes to completing the mortgage application it is important that you declare the credit card limit – not the balance that is on the card. In the eyes of the bank if you have a $10,000 limit on your card that is seen as available funds even if you only have $2000 on your credit card. A broker can work with you and help find the best option for your individual application here.
Get your application sorted
If you find yourself in a situation where you know your credit history may not be great feel free to give us a call and use our home loan calculator to help you budget and assess your options for a mortgage. We work with our clients to assess all options available, even if we just put some financial goals in place and you come back to us in a few months. At Rethink, we will do our best to help you achieve your dreams.