You’ve done the hard work of saving up for a deposit for a property, only to find the job isn’t done when it comes time to apply for a mortgage.
And getting approved for a mortgage is only going to get more difficult in 2022. First, APRA has increased the “stress test” for home loan applicants to 3% from its previous cushion of 2. 5% from November 1, 2021, with the aim of preventing borrowers from taking on too much debt. .
And while many experts have predicted that the Reserve Bank of Australia may increase the cash rate in 2022, many lenders have already raised interest rates, especially on fixed rate home loans.
Meanwhile, house prices have continued to soar despite weeks of closures and restrictions in parts of the country. the latest CoreLogic figures show the national home value was 1.3% higher in November – the 14the consecutive month of growth.
This means that potential borrowers could be faced with a year of sky-high home prices, coupled with rising interest rates and stricter service requirements for home loans.
This is why it is more important than ever to cross the points and the points when applying for a home loan. Whether you’ve been turned down for a home loan or want to increase your chances of approval, there are a number of steps you can take to increase your chances of getting mortgage approval in 2022.
How To Improve Your Chances Of Getting A Home Loan
It goes without saying that your credit rating and your credit history are one of the most important factors in your loan application. Lenders look at your credit score to assess your reliability in paying off your debts and your likelihood of defaulting on your mortgage.
The higher your credit score, the higher your chances of getting approved. Additionally, lenders are more likely to reserve their lowest interest rates for borrowers with excellent credit. Before applying for a home loan, be sure to grab a copy of your credit report and go through it with a fine tooth comb for any errors.
If your credit score isn’t where you want it to be, consider working to improve it. This may include:
- Pay off your existing debts (an interesting step for any home loan applicant)
- Automate your refunds so you never miss an invoice
- Consider lowering your credit card limit
- Due diligence on your unpaid debts
There are no hard and fast rules for which one lender can reject your application and another can approve it. But a fairly universal rule of thumb is that having unpaid debts or unpaid bills can hurt your chances of getting approved.
Make a list of all the unpaid debts you haven’t paid yet, including your credit card. Now take a look at your budget and ask yourself if you can spend more money on these debts before your mortgage application. Applying for a debt-free home loan can help increase your chances. Some brokers even recommend paying off your tuition (HECS / HELP debt) before applying for a home loan.
Next, browse your utility account history. It might take a little while, but you’d be surprised at how an unpaid and forgotten phone bill from years ago affects your chances of getting approved. Your utility repayments are reflected on your credit history, including late payments or defaults, so it may be worth checking your credit report for any issues here.
If you’re applying for a home loan, you’ve probably heard the term “genuine savings” before. It is simply when a borrower saves money over time by budgeting and regularly depositing into a savings account. Inauthentic savings can refer to donations of inheritance and money, tax refunds, the sale of assets or shares or equity in a property.
Typically, a mortgage lender may want to see proof of “real savings” over a period of at least three months when you apply for a mortgage. It helps demonstrate a level of financial responsibility because you can budget effectively and display healthy financial habits.
If you’ve inherited your home deposit, for example, and haven’t saved money in a separate savings account in the past few months, it may be worth building up ‘real savings’ beforehand. to make your request.
- Avoid the “great resignation”
As many Australians take advantage of their freedoms after the lockdown, a growing trend has emerged among workers: the great resignation. Employees who stayed under tight restrictions are now seeking greener pastures and are quitting at a higher rate.
While there’s nothing wrong with resigning from a position you don’t like, it’s important to keep in mind the impact it can have on your mortgage application. Lenders look for the stability of your finances, and that includes the income you earn from your employment.
Being employed full time for more than 3 to 6 months may be considered preferable, and being employed for at least 12 months in a position often considered ideal by mortgage lenders.
If you’ve recently started a new job (even one that pays a lot more), consider putting your application on hold until you’ve at least left the trial period. This can help increase your chances of loan approval.