It can be a tricky process getting all your material together for a mortgage application, and often buyers are frustrated when their application is sent back with requests for further information.
Aussie has pulled together a list of some of the most common mistakes people make to help you ensure you get it right first go:
1) Be honest about your finances.
Lenders do credit checks and they will discover a less than perfect credit history if it exists. A black mark such as a default on your history can be caused by something as simple as a very late phone bill, which could impact your ability to borrow for up to five years. You mightn’t even be aware that something has impacted your credit score unless you take a look, which you can do for free through a number of different services including Aussie’s own Credit Savvy website.
Honesty is the best policy. Let your broker know upfront so they can help you to try and find a lender that will accommodate your history.
2) Keep your eye on the job
It is important to demonstrate a steady income and in order to do that, you will need to show you have been employed for between six months to a year. If you are looking to move jobs while looking to get a mortgage, it might be wiser to stay in your current role before looking for new work to satisfy lender requirements.
If you simply can’t stay where you are, then it might be better to postpone your mortgage application until you have settled into a new job.
3) Let Lenders know about your “backup” credit card
Lenders will look at your bank statements carefully and if you make a regular payment on a credit card you didn’t tell them about, they will see that on your statements and potentially reject your application for ‘non-disclosure’. Better to be honest, and better still to pay down or consolidate your debt first if you have an excessive number of cards.
4) Know your lending criteria
A good broker can help you with this, but many lenders have specific criteria that could range from the floor-size of your property (often they won’t lend for studios under 50m²) to acreage (you may need more deposit) to a number of other issues. Getting a pre-approval secured in advance can help you through any last minute lending criteria hiccups.
Similarly make sure the loan you are applying for suits your needs. Do you need an offset or redraw facility? Do you want the security of a fixed rate, or the option to make extra repayments? Think about what you want in a loan before simply applying for the one that is willing lend you the most for the cheapest interest rate.
5) Do your sums
This is wide ranging from knowing and calculating all your costs to purchase from building reports to conveyancing fees and stamp duty; to ensuring you are not over extending on your borrowing capacity. Similarly you don’t want everything to fall through because you miscalculated your deposit by $20,000, or forgot to add Lender’s Mortgage Insurance.
While a lender may be willing to offer you a large mortgage, think about how the repayments would affect your lifestyle. Could you still go out to dinner occasionally? Or will baked beans do nicely? Can you keep your expensive hobby? Could you still afford rates and utility bills?
It is important to be honest with yourself, and recognise that you will be paying your mortgage for many years to come, so it would better to be manageable.