Buying a home may feel like an impossible dream for many people right now. And there’s good reason for that. But while it is disgustingly expensive, and a much more difficult feat than is fair, there are some things you can do to improve your chances of landing a home loan – even in this stupidly expensive market.
I chatted with Faith Brockhoff, Chief Customer Officer at digital lender Tic:Toc, who shared some common mistakes folks tend to make that impact their borrowing ability.
Below are the ‘red flags’ lenders look for when considering your home loan, as advised by Brockhoff.
Sitting on community boards
“Credit agencies don’t immediately distinguish between holding board positions on for-profit companies and those on small local not-for-profits. If you’re community-minded and sit on a lot of local boards, a flag might appear on your credit history,” Brockhoff shared over email.
Getting married, obtaining a doctorate or holding public office
“What do these things have in common? They’re all instances where your name or salutation (like Dr, Ms or Councillor) might change. For credit agencies that means a duplicate or cross-referenced credit profile might be generated for you.”
Obviously, we’re not advising that you avoid getting married or can your plans to achieve a doctorate. But just be mindful that these life events may cause a hiccup.
Making multiple applications
“You might inadvertently make more than one application as you’re deciding where, whether and how to buy your home. You should know at the outset that recent credit applications are recorded and having multiple on your file can raise red flags for lenders.”
Buying in an area you don’t live
“Lenders want to know that you have local knowledge and connections to the area you’re planning to purchase in.”
Moving house a lot
“Referred to in the industry as ‘address instability,’ this can leave you with questions to answer. Lenders want to know that you have a stable financial life and frequent moves is something that will draw attention.”
Getting your own numbers wrong
“Typically people know how much they earn, but frequently they will round up or down which means the details on their application do not match those on their credit report. The same applies to loan balances and credit card limits.”
What can you do to improve your appeal as a home loan candidate?
A few things, thankfully. Brockhoff shared that in addition to considering the above when processing an application, you should prepare yourself by beginning to save your cash as early on as you can.
“Show a steady saving history so your lender can see that you’ve got your finances organised and under control,” she said.
It’s a good move to put away the equivalent or more of your estimates repayments each month, she advised. Alternatively, if you’re renting and your rent is lower than your proposed repayments, be sure to save the difference.
Give yourself a better shot by reducing your fixed monthly payments, too. Brockhoff recommended searching for a cheaper phone plan or better car insurance deal as a couple of examples.
If you’d like to do a little more reading in the area of purchasing a property in Australia, check out this summary of the average costs of homes according to state.