6 things to consider if you're trying to get a mortgage next year

6 things to consider if you're trying to get a mortgage next year


Between gifts, holidays, savings, a new job and a new home, that list of resolutions can be endless. If buying a home is on the top of your priorities, there are 6 things to think about this Christmas that could help your chances of getting a mortgage.

1. Manage your credit well after the holiday period
New year is the time to pay down any existing debts and avoid taking on new ones. As tempting as the special offers in the New Year sales might be – think again. Getting your own home might mean other things need to wait.

Lenders will look very closely at your credit file as they will want to make sure that you can meet your ongoing home loan repayments. So you want to make sure that your are paying all your bills on time and avoid being late with any repayments. For more tips on how to keep your credit under control click here

2. Check your existing credit score
There is a common misconception that checking your credit report can be detrimental to your overall score.1 This is not true. There are two types of checks that can be made on your credit score. Checking your own credit report is a ‘soft’ enquiry and won’t affect your score. However, giving a lender permission to check your credit report is classed as a ‘hard’ enquiry and this does affect your score. The Australian Securities and Investments Commission [ASIC] suggest an annual check, something you are entitled to do for free2, to:

  • Make sure that your name or date of birth are correct,
  • See if your address needs updating,
  • Check if any debt has been listed twice or whether the amounts are correct, 
  • Whether you have been recorded as missing any repayments,
  • Whether someone might have stolen your identity to get credit.

If anything is incorrect now is the time to get things fixed. You can do this for free by ordering a report from a credit reporting bureau, such as Equifax. To learn how credit score is calculated and what can cause a default to occur click here.

3. Keep all your documents up to date
Lenders will want certain information from you when you apply for a home loan so they can get a full understanding of your financial situation. So it’s a good idea to keep the latest statements for your loans and any credit cards, your savings records, as well as your pay slips and tax returns on hand to help speed up the home loan application process. At Pepper Money we understand that providing the necessary paperwork to document your income can sometimes be a challenge especially if you're self-employed. That's why we offer alternative documentation (Alt Doc) home loans. 

4. Work out the right type of mortgage for you
Fixed or variable? Principle and interest or interest only? When you are choosing a home loan it's important to work out the features you need from your loan and what that will cost you in fees. Again, ASIC offers a useful overview. They cover the different types of loans available and what you need to consider before you sign up. Check them out here to find out about:

  • How to compare home loans
  • Principal and interest loans
  • Interest-only loans
  • Variable, fixed* and split rate home loans
  • Redraw, offset and line of credit
  • Construction loans for building or renovating

5. Avoid changing careers during the buying process
Leaving the corporate job to start your own business or looking for a new workplace can be an exciting career change, but it may affect your ability to borrow when you’re trying to secure a home loan. Some lenders may assess a borrower’s income and savings, amongst other factors during the application process, and starting a new business might mean inconsistent cash flow at the beginning or a lack of standard documentation.

If you’re having trouble getting a home loan because of your type of employment or because you have non-standard income, talk to us on 13 73 77, we'll do our best to help find a way forward. For more tips click here.

6. A word about ‘genuine’ savings
Lenders will want to see you have a good ability to save. That’s because they know that people who have saved more than 5% of the purchase price in a savings account, shares or term deposit, are much more likely to pay back a home loan than people who don’t show they’ve been able to make any savings. Most look for what they call genuine savings. So it’s a good idea to put all of your spare funds into a separate savings account and keep making regular contributions. Here at Pepper Money, we look at the big picture and have designed some home loan products where genuine savings are not always required. 

Before you apply, it's helpful to start by getting an idea of what you can borrow to kick start your property search. It's easy to do using our home loan calculator and it won't affect your credit score. 

Have any questions at all about your eligibility for getting a home loan? Then talk to us. We are here to help people who don’t meet a traditional banks’ criteria. If you’d like to know more have a chat to one of our Lending Specialists on 13 73 77 or contact your Pepper Money broker. They’re there to help.

*Currently Pepper Money doesn't offer fixed interest rates 

Sources: 
Credit rating myths busted
MoneySmart credit report fact sheet 2014 

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