How do I qualify for a home loan?
While lending is a fast pace, rapidly changing world with new policies and products released constantly the basics remain the same, lenders are looking for character, capacity and collateral.
Your lender is looking for a good credit history, in Australia we are moving from a “negative reporting” regime, where you are reported for negative behavior only – to a regime where positive repayment history is also reported, and negative behavior in far greater detail. What does this mean? Where previously you would only be reported for a missed payment of 60 days or more, lenders are becoming able to report a payment which is paid just a few days late. (So move everything to direct debit!) They are also able to report positive behavior which is good news if you need a fresh start.
Lenders are also looking for a stable employment and home address history, and a list of assets which is both greater than your current liabilities, and is reasonable for a person of your age and with your income.
Quite simply, can you afford the proposed loan? In this we are looking at your income and liabilities & other commitments, but also your savings history. If it looks like you have no spare income at the end of the month then can you really afford a new commitment? Perhaps you are willing to make sacrifices for a goal - I can’t tell you how many times I hear “we’ve been living life, enjoying ourselves, but now it’s time to get serious”. If this is your light bulb moment I applaud you for taking action.
The security offered for any loan should be easily sale-able for the lender if you’re unable to make your repayments, sorry, that’s a harsh reality but it’s fact. For this reason the lenders may not love that unique home that you have fallen in love with. There are not many properties which are completely unsuitable for security, more likely they may suit one lender more than another, or the compromise is to borrow less as a percentage of its value so the lender has more comfort.
To make yourself more suitable for a loan, get rid of any unnecessary commitments, stay put in your job and your home – ideally 3 years is considered stable, show an ability to save and no, please don’t suggest that the rock and roll themed former lighthouse is a great investment…
full article in Western Weekender:
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