Are you working towards securing a mortgage in order to buy a house? Here is what you can do in order to get ready to apply for a home loan and be successful!
Create a budget. Saving for a house deposit and being prepared to pay mortgage payments over time means having a strict budget. Use our “Track Your Budget” worksheet to work out your income and expenses and plan a budget which will help you to secure a home loan, as well as be able to manage repayments afterwards. After you have set up the budget comes the crucial second step – sticking to it!
Save for a deposit. Thanks to your careful budget you should be able to save for a decent house deposit. Although it is sometimes possible to secure a home loan with a minimal deposit, the more you can put aside the better. The lower your deposit, the less favourable you can expect the terms of your mortgage to be: for example, if your deposit is under a certain percentage of the value of the house you a buying you will need to purchase mortgage insurance, which can be a significant expense.
…And keep saving. Even once you have a healthy house deposit and enough in the bank to be approved for a home loan, saving shouldn’t stop there. There are a variety of other costs associated with buying a house, and you should also be prepared for maintenance costs and repairs, so it is a good idea to put money aside for all of this.
Pay down any debts. You are more likely to be approved for a loan if you have minimal other debts. So, in preparation for applying for a home loan, make sure to pay off credit cards, personal loans and any other debt. You don’t necessary have to completely clear these debts before applying for a home loan, but you want them to be a very small amount compared to your income.
Bolster your credit rating. Check the sections above on how to improve your credit rating before applying for a mortgage.
Boost your income. Of course, it may not be as easy as that, but this would be a good time to ask for a raise or pursue additional income streams.
Aim for employment stability. Lenders look more favourably on applicants who have been in their jobs for two years or more, so if possible avoid changing jobs in the lead up to applying for a home loan.
Decide what you can afford. Run your figures and work out how much you can afford to borrow without putting yourself under mortgage stress. If unsure, seek financial advice.
Investigate Government support. Depending on your situation, you may qualify for Government support to help you buy a home.
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