The 2 Most Important Factors To Get Your Home Loan Approved

Once you’ve nailed your budget, researched the housing market and found the house that suits your needs, it’s time to fill out the application for your mortgage loan!

The information you provide in this application is critical, as this is the point the lender decides to approve or reject your application based on what you give them. So what information should you include? What things do they consider when approving an application? What exactly are they looking for in an ideal home loan candidate? 

Read on for what in my opinion are the two most important factors when submitting your home loan application.

1. Capital & Income - Show them you can pay the mortgage

At the end of the day, lenders want to make sure their money will come back to them without major problems, so you need to use your application to convince them that you can and will pay the loan. Lenders need to confirm two major things, the first one is that you have enough capital cash for the 15% - 20% deposit for the property. The second, that you have enough income to cover your repayments. Lenders usually want to see that you can allocate around 30% of your income to the payment of the loan. This simply means you should demonstrate that 70% of your income is sufficient for your living expenses. Your capital savings and your income should be reflected in your bank statements by showing sufficient savings (since you only use about 70% of your income) and a detailed balance sheet that includes all of your income and expenses (showing you spend less than what you earn). Check your credit history before including it on your application and avoid having active lines of credit (other loans / credit cards) while applying for your home loan, as access to credit counts towards your expenses (even if the credit card is not being used).

Your capital savings combined with your spending history is what lenders are interested in. If you’re in the green with clear savings and reasonable spending habits, lenders will be confident in your ability to repay your mortgage loan and your application is much more likely to be approved.

2. Stability

Income stability is another factor that boosts lender confidence. To lenders, permanent or long term employment represents a stable income, which demonstrates increased likelihood of consistently meeting loan repayments. The longer you can show you have been consistently employed and/or have been receiving a stable income, the more likely the lender is to approve your application.

In the case of business owners or entrepreneurs, it is important to support your application with bank statements and documents to prove your business has a history of sufficient cash flow and that finances and operations are stable. In these cases, time is important as lenders generally require 2-3 years of business operation to consider it as an income. The longer your business has been operating and showing profits, the more likely the lender is to approve your loan application.

If you are confident you have these two factors, you’re very likely to get your application approved! If you would like help with your home loan application or even just some further advice on how best you can get your home loan approved, give us a call on 1800 3 PEASY or contact us via our website www.peasy.com.au. Our team is always ready to guide you through any step of the property buying process!