How to prepare for your home loan application

Whether you’re just starting out on your property search, or you’re getting ready to buy, applying for a home loan can sometimes feel a little daunting. But with a bit of guidance and the right preparation, you could be moving into your home sweet home before you know it. 

Basic lending rules

Lending rules are the key criteria you’ll need to meet in order to borrow with most banks, so it’s important to know how your situation stacks up against some of the key rules.

Reliable employment: Preferably 6 months in your current job, 12 months for casual and contract workers and 2 years if you’re self-employed, although lenders may make an exception for otherwise strong applications.

20% deposit: 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.

Good credit history: If you have a poor credit history (think missed or repeated late payments on loans or credit cards, loan defaults or high levels of current debt) lenders can be wary since a poor credit history can put you in the ‘high-risk’ category. 12 months before you apply, pay down current debts, avoid taking out unnecessary credit and reduce your credit limit. Find out what else you can do to boost your chances of approval here. 

Type of property: Lenders are essentially conservative so they’re generally not looking for square pegs when it comes to properties. They’ll look more favourably on ‘standard’ dwellings that are more than 50m2 in internal area and some lenders may have restrictions on locations too, with large towns and capital cities considered to be a lower risk. 

Your assets: Assets are your friend when you come to apply for a home loan but don’t worry, you don’t need to be a property mogul to secure a loan either. Lenders are looking for an asset position that aligns with an applicant's age and income. So for example, if you’re a 55 year old first home buyer with a great income but no assets, lenders may make additional inquiries.

Having a guarantor: Could a parent or family member guarantee your loan? For first home buyers in particular, especially those looking to buy with less than 20% deposit, having a guarantor may help get your application across the line.

Preparing your paperwork

If you’re almost ready to apply for a home loan, gathering the right information can help fast track the process. 

Lenders are most interested in understanding your requirements and objectives for the loan and your financial situation in order to assess whether you have capacity to repay the loan, so you’ll need to provide details about your income, assets, liabilities and expenses with your application including:

• Evidence of your employment and income: employment contracts, pay slips, tax returns, letters from your accountant.
• Details about current debt: Credit card and loan repayment history, outstanding debt and credit limits.
• Expenses: An accurate estimate of your regular, ongoing expenses including rent or mortgage repayments, utilities, entertainment expenses, insurances, car expenses.
• Information about assets: Property and/or vehicle values, share-holding and super statements.
• Spending and savings: Bank statements for everyday spending and savings accounts.

Ready to explore your home loan options?

Our Your Way Home Loans are designed to help educators and their families into their own home sooner with competitive rates, plus access to discounts for eligible essential workers with the Your Way Plus Home Loan.

Explore your home loan options here or book a call back to speak with a Lending Specialist at home, on the phone, or via a video call¹.