Mortgage Application Tips
Shop Around, Don’t Go To Your Own Bank
No matter what bank you are with, each one only has a limited range of loans when compared to everything that is in the marketplace. Adding to this, non-bank lenders can often have much better rates than any of the big banks.
You can find the right loan for you, by yourself, through using a comparison site like MoneyBuddy, or you can go to a broker to do it for you.
Either option is a great choice over simply sticking with your bank. If you aren’t the most financially saavy person, it might be a good idea to head to a broker anyway, as they can also give you some free information, tailored to you and your cicrumstances.
Some (most) lenders will try and throw as much money as they can at you, but that doesn’t mean you should borrow everything they offer! Always remember to take your deposit into consideration when you are deciding what amount to borrow.
The higher your deposit in comparison to the amount you are borrowing means that you will have a lower LVR (Loan- To- Value Ratio). The lower the LVR on your loan, the better the interest rate will usually be. Plus most banks require you take out mortgage insurance if your LVR is too high (around 90%), which can add tens of thousands to your loan costs.
Free Yourself From Joint Agreements
If you signed a lease for a house with an old partner or friend but have now moved on, make sure your name isn’t on that lease anymore, otherwise you run the risk of others ruining your credit rating.
The same goes for joint credit accounts, joint mortgages, bank-accounts, phone bills, etc. Call up your real estate, your bank, your electricity provider, whoever the accounts are with and ask about how you can remove yourself from the accounts.
Check Your Property Is Eligible
Banks won’t give you a loan on some types of properties. Make sure you tell the lender exactly what you’re looking at and don’t leave out any details.
Some little things can have a huge impact, for example, if the house you want to buy previously had a man making furniture in the shed out the back and selling it, then that property could be seen as being half commercial and the bank might not give you a loan.
If you let your lender know upfront, all the information that you think could possibly impact their decision, this will save you any trouble later in the process.
Avoid Other Credit Applications
If you are thinking of getting a mortgage in the near future, try to avoid any other credit applications leading up to the mortgage application. Each time you apply for credit, whether you get it or not, is added into your credit file, and the banks can see this when they are assessing you for a mortgage.
If you have been applying for different types of credit, the bank might think something fishy is going on, and wither refuse you a mortgage or assess you as being a higher risk and then only offer you higher interest rates on the home loan.
Reduce Unused Credit Card Limits
A lot of people don’t realise that it is the credit card limit that counts as the money you have borrowed, not the amount you actually have borrowed. This is because the bank sees the credit card limit as a potential borrowing you might use and will thus count this amount as a debt when they are working out your mortgage application.
If you have a credit card, or a few cards, and you aren’t using them up to their credit limit, call up the credit card company and ask for the limit to be reduced. If you cannot reduce it any further, e.g. the minimum credit limit, then consider cancelling the card and transferring the balance to another card.
For example, if you have 2 credit cards with a credit limit on each of $6,000, but have only used $1,000 on each, the bank sees this as a $12,000 debt, even if you only have $2,000 outstanding.
If you cancel one, transfer the $1,000 onto the first card, that means you have one card with a $2,000 outstanding balance and a $6,000 limit, thus a total debt as seen by the bank, of $6,000.
You’ve just reduced your credit card debt by 50%.