Applying for a Home Loan
Applying for a loan is a very big step and can be quite daunting for all of us. It isn’t always straightforward. To make it easier for you, here is a handy list of all things you may need to consider before meeting with your credit adviser.
1. Will you be able to repay the loan?
Lending institutions will want to know about your income, and will also want to see proof. This may include your payslips if you are employed, or your tax returns if you are self-employed. They will also want to see evidence of any other income sources that you have as well. This may include rental income, share dividends, or any other related income information.
2. What are your living expenses?
You will need to provide a written budget for your living expenses for your lender. If you have not made a budget you, you can try this budget planner calculator from eChoice. Make sure that your budget is realistic as well!
3. Do you have a savings history?
You should be able to show that you are able to save money, and that you don’t spend everything you earn. This will be particularly important if this is your first big loan.
4. Do you have a deposit?
Lenders will require you to state your deposit and associated purchase costs. Most lenders will want at least a 5% deposit. However, if you are able to have more than a 20% deposit, you may be able to avoid having to pay for a lenders mortgage insurance.
5. Do you have stable employment?
It may be a bit more challenging to qualify for a loan if you have had a recent change in jobs, but it won’t completely disqualify you. Lenders are generally less comfortable lending to someone who they have seen to have a variable job history with numerous jobs in the past, or long gaps between employment.
6. Have you considered your current net worth?
Your net worth is essentially a measure of your personal finance value. You can calculate this by totaling all your assets, and subtracting your liabilities. Make sure that this value is realistic.
7. How is your credit rating?
Understanding your credit file can help you to make more informed decisions regarding your finances. If your credit rating has ‘black marks’, you could be charged a higher interest rate when applying for credit. It is a good idea to check your credit rating before applying for a loan to ensure that it is up-to-date and accurate.
You can check your credit history from various credit reporting agencies, including Veda, or Dun & Bradstreet.