Applying for a home loan: how to give yourself the best chance

When it comes to getting your home loan application approved, it’s important to know what lenders are looking for, as well as the things you can do before you apply to give yourself the best chance of getting the green light. 

Disclaimer: The information contained in this article is of a general nature only and should not be taken as financial or legal advice on any of the topics discussed. Always consult a financial adviser before making any investment decisions.

So what do lenders want to see?

In a nutshell, a lender wants to gauge your risk as a borrower to make sure you’ll be able to meet your repayments over the life of your loan. The key things they'll look at are your income and employment history, any assets or liabilities (other debt) that you have, along with your home loan deposit, your credit score and your spending and savings habits. 

The good news is, there’s a lot you can do before you apply to boost your chances of approval.

Know your borrowing power - Use a borrowing power calculator to get a snapshot of how much you’re likely to be able to borrow based on your financial situation. That way you can avoid overreaching when it comes to your property search and loan application amount. 

Optimise your loan to value ratio (LVR) - A LVR refers to how much, as a percentage of a property’s purchase price that you’ll be looking to borrow. So for example, with a 10% deposit, you’ll need to borrow 90% of a property’s value. It’s why having a larger deposit, even if it means saving for longer, can help boost your approval chances. Plus, having at least 20% will mean avoiding Lenders Mortgage Insurance which could save you thousands. 

Lock in secure employment - Planning to borrow in the near future? This might not be the time to quit your job, drop hours or start your own business. Having proof of secure, ongoing employment with reliable income is one of the best things you can do to convince a lender you’ll be able to meet your loan repayments. Could it be time to ask for that pay-rise or bump up your weekly hours, even just in the short term?

Cut spending and save regularly - Now’s the time to take a look at your spending habits to see where you could cut back, plus, find out how much you can put aside regularly to boost your savings. Go through your bank statements and enter your income vs expenses into a savings planner tool to find out what’s left over each week or month for savings.

Pay down debt - Lenders will also look at your current debt levels including car or personal loans, credit card debt and store credit. One of the best things you can do to get your loan application across the line is reduce the amount of debt you already have. Pay down your credit card, get rid of store cards and if you can, increase your loan repayments above the monthly minimum.

Find out how to set up automatic payments here.

Make repayments on time - Missing loan or credit card payments can be a big red-flag for lenders so make sure you never miss your payments by setting up automatic payments or SMS payment reminders in Internet Banking. You could also organise to get your salary paid directly into your Teachers Mutual Bank account so you know the funds will be there to cover your regular payments. 

Gather your evidence - Make sure you have your ducks in a row before you apply - you’ll need to provide proof of your employment and income, tax returns and bank statements as part of your application so it’s a good idea to start getting your paperwork together before you apply.  

Need help from the experts?

Our Lending Specialists are here to help you find the best home loan for your situation, not someone else’s.

You can make a booking to talk to a Lending Specialist either at home, on the phone, or on a video call.

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