Prepping for your home loan application 101

Whether you’ve started searching for your dream pad or you’re just crunching the numbers, the chances are applying for a home loan might be on your radar. 

And while home loan applications definitely aren’t the most exciting part about buying your own pad, they don’t need to be super daunting or stressful either.

Knowing some basic lending rules and getting your paperwork prepped well before you apply can go a long way towards setting you up for home loan success. 

Know some basic lending rules

Lending rules are key criteria that most lenders will want you to meet when they’re considering your home loan application. Knowing what those rules are in advance can help you weigh up your own financial situation to make sure you put your best foot forward:

Solid employment + earnings: What does solid employment look like? For most lenders it will mean proof of ongoing employment in the same job for preferably 6 months, or 12 months for casual or contract workers - and potentially even longer for self-employed applicants who may need to demonstrate ongoing self-employment for at least 2 years.

‘Safe’ deposit amount: While many lenders ask for a deposit of 20%, for borrowers who have a smaller deposit, Lenders Mortgage Insurance (LMI) can help bridge the deposit gap and provide an opportunity to get into the market with less than 20%, as the LMI provides Lenders with a way of managing the increased risk that comes with a smaller deposit.

How’s your credit history?: A good track record with credit will go a long way to reassuring lenders that you’ll be able to service your home loan. What they don’t want to see? A history of missed or repeatedly late loan or credit card repayments, high levels of outstanding debt or high credit limits. Improve your debt position, by paying off debt and reducing your credit limit 12 months before you apply. Find out what else you can do to boost your home loan approval chances here. 

‘Low-risk’ properties: When it comes to the type of property you’re looking to buy, a treehouse in a remote location? Probably not going to make a lender’s heart sing! Lenders are usually looking for ‘standard’ houses or units that meet lending rules around minimum sizes (typically above 50m2) and possibly even locations. Properties in urban centres and major towns for instance, will be considered lower risk.

Do you have assets?: Got share investments, own your own car or got a sweet super balance? You don’t need to be a property baron to secure a home loan but lenders will want to see that your asset position matches your age and income. If you’re a 55 year old first home buyer, for example, with decent earnings but no assets or investments, lenders may make additional inquiries.

Home loan guarantors: Having a parent or family member go guarantor on your home loan application may help your approval chances, especially if you’re a first home buyer with less than 20% deposit saved. 

Getting your ducks in a row before you apply

To help a lender assess your ability to service the loan, you’ll need to provide details about your income, assets, liabilities and expenses. Taking the time to get your paperwork together before you apply can help fast track the process, plus make the experience as stress-free as possible:

• Proof of income + employment: pay slips, employment contracts, tax returns etc.
• Existing debt details: Credit card and existing loan statements, statements of outstanding HECS or other government debt.
• Monthly expense breakdown: A detailed breakdown of your monthly expenses including rent or mortgage repayments, food, entertainment and car expenses, utilities, insurances etc.
• Asset records: Share holding or other investment statements, market estimates for property and/or vehicles in your name.
• Bank statements: Bank statements for your everyday spending and savings accounts.

Keen to explore some great home loan options?

Our Your Way Home Loans are designed to help university professionals and graduates buy their own home sooner with competitive rates, plus access to discounts for eligible university professionals with the Your Way Plus Home Loan.

Need some expert guidance to find the best loan option for you? Book a call back to set up a time to speak to one of our Lending Specialists either at home, on the phone, or via a video call. Or, jump right in and start exploring your home loan options here¹.