Banks love to lend to borrowers who show good habbits
Lenders love to lend money to borrowers who show good financial habits. Good habits are like gold when it comes to borrowing and it’s never too late to start developing them.
What the lenders like to see from you
In general, banks are most likely to lend to borrowers who:
Are working with steady employment history
You have a stable and predictable income. This can be if you’re working for a boss or if you’re your own boss. As an employee, banks will look for 3 years employment history with at least 6 months or more in your current job. If you’re self-employed, then lenders will want to see you’ve been trading for 2 years.
Are able to make regular loan repayments
Banks want to lend you money to get the things you want but they do not want to get you into debt you can’t afford so most will ask you to show them how much you spend each month on things like groceries, transport and other essential items. You can usually make a good estimate of this by having a look at the statements on your bank transaction account for the past 3 or 4 months.
Have only a few consumer debts
Making repayments on credit cards and personal loans take up a lot of your ability to borrow and in most cases, the fewer you have the better. But having one or two can be beneficial as they tell the lender a little bit about your history of handling debt. If you have a credit card, make sure your payment history is nothing short of exceptional.
Have a few assets already
Banks like to see you’ve been putting the money you’re earning to good use in the form of a few assets like property, vehicles, savings and superannuation. How much you have, and what sort will of course depend on your life stage and banks take this into consideration. But even a young, potential first home buyer will need to have a few dollars saved as a deposit.
Don’t have crazy monthly expenses chewing up your income
If you’re saving for a home it’s likely you’ve already cut back on discretionary expenses but before you approach a lender, now is the time to look at anything you could do without. If you have 2 streaming subscriptions but really only watch and get value out of one, cut one off. Do the same with other non-essential expenses where you can.
Have a deposit saved over 6 months
Depending how much the property’s value you need to borrow, you’ll have to show a lender you’ve saved towards the deposit. This needs to be done over a period of 3 to 6 months.
Have chosen a property in a good location
Banks will give you an approval in principle, but the majority give your application more attention if they know you’re serious about buying and have a contract of purchase already. You can do this with a finance clause of 21 days before your finance is approved.
What will you need to show lenders if you want a loan now?
Pay slips from work if you have a boss
Tax returns and financials from the last two years if you’re self-employed.
Details of loans you have, like credit cards and other debts
A completed application form (We’ll do this with you)
Identification documents like passport, licence, Medicare card.
Savings account statements for 6 months if you’re buying
Existing home loan statements if your refinancing or using equity to buy
This is just a guide so if you find you don’t quite fit right away with any one or more of these things, and it doesn’t mean you can’t get a loan.
As qualified brokers skilled with over 23 years’ experience, we know how to get you prepared to obtain the right loan and product. The best course of action is pick up the phone and tell us about YOU. We will do the rest to make your dreams a reality