6-step prep for a successful home loan application
The hunt for the right property can take time, and once you’ve found it, you need to move fast—otherwise, some other savvy investor might beat you across the line. So it’s best to start preparing early, and one of the best ways to do that is to ensure your finances are in order well before you’re ready to buy.
When I say that, I don’t just mean being financially secure and ready to invest—that’s a given. But when you apply for a home loan, the bank, building society, or credit union will need to be confident that you’re able to meet your repayment obligations, and that means you need evidence of your financial situation.
Here’s my list of tips for preparing your finances to ensure your home loan application progresses smoothly successfully.
1. Create your digital filing system
When your mortgage broker or banker asks for certain documents, you’ll want them at hand, ready to go, and in a format that’s easy to search. The easiest way to achieve this is to create a digital file store for all these documents, with a consistent naming format that clearly shows the type of document and the period it covers. Keep it up to date by adding new statements as you receive them, and review it at least once a month to make sure nothing is missing. And if you store it in the cloud (on Dropbox, OneDrive, Google Drive, or another service), you’ll be able to access it from anywhere via your mobile device.
2. Track your savings
If you’ve been saving for at least three months, but preferably six months or longer, your lender can see you’re committed to buying a property and responsible with your money. The best way to demonstrate this is by collecting
● Statements for all your bank accounts
● Payslips from your employer (or financial statements, if you are self-employed)
● Statements for other income-earning investments, such as shares or managed funds.
3. Track your spending too
Wouldn’t it be nice if we could save every dollar we earned? We all know that’s not possible, but it’s important for your lender to be able to separate the necessary outgoings from your disposable income when assessing your ability to service a loan. Use a budgeting tool to check you’ve covered all your ongoing expenses and any other debts you need to repay, and then review your bank statements to be sure you haven’t missed anything.
4. Put your portfolio on display
If you have an investment property, you’ll need to compile all ingoings and outgoings for the latest six to twelve months. Include:
● Rental statements or bank statements to show rental income
● Loan statements showing your regular repayments
● Rates notices and utility bills
● Tax invoices for all expenses, such as maintenance, inspections, and insurance.
The good news is that you’re probably already receiving these statements electronically, or can access them through online accounts, so you won’t have to scan lots of files.
5. Have a backup plan
I’m not talking about backing up your files here (though that’s a good idea, too), but about showing evidence that you’ve got a plan in place if things go wrong. If you’ve insured yourself and your key assets, your lender is likely to see this as an additional level of security that ensures you’ll be able to pay off your loan even if you can’t work for a period of time. As an added bonus, you’ll also be more financially secure in case of an unexpected problem.
6. Scan your ID documents
Your lender will need to verify your identity before arranging finance, using a combination of documents that carry different “points”, so it’s best to have these on file. (Some lenders may want to make their own copies, but trust me that the effort of scanning or photographing them yourself will not be wasted: they’ll also come in handy time and again for online verifications.) Some valid forms of ID you may wish to scan and file are
● Current passport
● Current driver licence or proof of age card
● Birth certificate
● Medicare card
● Rates notices and utility bills
● Letters from employers.
The sooner you get started, the longer your financial history will be, on file and ready to show your mortgage broker or banker when the time comes. So don’t delay—get started right now. And when you’re ready to talk to a mortgage broker, talk to us. We work with you and your mortgage broker to achieve the best outcome for your property goals.
Disclaimer: The information contained in this article is for information purposes only and cannot be relied upon. You should seek professional advice tailored to your specific personal and financial circumstances.