Banks and lenders use a set criteria to assess a home loan application. If you understand this method and tick all the boxes, then you’ll get approval faster.
Think of a home loan application like an interview. Therefore, before submitting your home loan application, get together as much information about your financial and personal circumstances as possible. Then when you go to see your broker or lender, you can present them with this information. This approach allows a creditor to get to know you, just like in a job interview.
Make sure you have the following:
- Proof of income
- Pay slips
- Tax returns
- Banks statements.
- Birth certificate
- Driver’s license
- Medicare card
It’s also a good idea to take credit card statements and personal loan information with you. Why? Well, a lender wants to know how much residual income you have left to service your loan after expenses.
Lenders including banks, use the Five C’s – Character, Collateral, Capital, Conditions and Capacity – to assess a loan application.
Your financial strength of character or your credit history says a lot about how you manage your money and tells the lender a lot about your potential risk to them. After all, a bank is looking at you as an investment. Subsequently, they want to know you’ll repay your loan and meet your due dates without them having to chase you.
Any assets and other items you own give your lender reassurance that you have security to back your loan. Other properties, shares and vehicles, as well as property content are assets.
If you have a deposit or other funds you can put towards the purchase of property, then a lender looks favourably at this. Also, the more capital you have in your bank account shows you’re able to save and manage your money. As a result, the more capital you have, the better.
How you intend to use the money, your preferred interest rate type and loan features are all loan Most lenders prefer particular loans for a purpose – home loan for property – rather than giving you a line-of-credit.
Known as a borrower’s ability to repay their home loan, your capacity is vital to securing approval. Accordingly, you need a stable job and reliable, regularly paid income to meet this requirement.
Often simple home loans that don’t require a lot of paperwork will have shorter processing times. However, investment-based home loans secured by more than one property can take longer, along with application by self-employed people. If you have the right documentation and meet the lending criteria of the lender, then your home loan should be approved within a month.