Buying property? How to increase your chances of getting finance approved by any bank

Lending environment in Australia has changed dramatically due to financial uncertainty faced by borrowers from either lack of employment security or property market outlook .

And because of these factors, banks are continuously introducing new policies for loan assessment and approval that’s catching new and previous borrowers out equally.

With over 100 home loan lenders and thousands of mortgage products available to Australians, how are you supposed to narrow down your options and pick the best one for you, let alone get it approved before the finance date without the bank constantly asking you to provide additional documentation!

Whether you want to borrow for the first time or you’re purchasing another property, follow these five simple tips to success.

It'll put you ahead of the game, streamline the process and increase your chances of approval before you even start applying for a home loan.

1. Organise Your Finances

Buying a house requires money, so having your finances in order before you get a loan (and the house, of course) will offer you the best chances of success.

Work out what you can afford to borrow based on your income and existing expense commitments, and subsequently, this will tell you which property price bracket you should be researching. If you need help crunching the numbers, free online tools like our borrowing capacity calculator can make things easier.

While you're in research mode, you need to be well aware of your own credit history as well. Any problems listed on your report - such as bill defaults and even prior loans or credit applications you've made - can potentially have a negative impact on your application.

Two to three months before you need to apply for finance, you should order a free credit report on yourself, so that you can check for any adverse comments and resolve any issues ahead of applying.

When you’re purchasing property, unless you’re using a guarantor, you'll also need to have your deposit ready to go ahead of time.

Generally, if you want to avoid paying lenders mortgage insurance premium, this means a 20% deposit on the purchase price of the property you want plus any other upfront costs associated with buying that property.

If you are willing to pay lenders mortgage insurance(LMI), you can get a home loan with as little as 5% deposit. However, you'll also need solid evidence that you have been regularly saving money for at least three months in a row when borrowing greater than 85% of the property value.

Lenders call this genuine savings and will review your savings statements to confirm.

2. New Buyers: Check If You're Eligible for Repayment Help

There are governmental schemes to help eligible first home buyers make a property purchase.

There's the ongoing state based First Home Owners Grant which provides first time buyers a lump sum of money towards their first newly built home or stamp duty exemptions to buyers of existing property.

There's also the new 2020 First Home Loan Deposit Scheme which allows first home buyers to provide just a 5% deposit and avoid paying LMI.

Unlike the state based first home buyers grant, the federal deposit assistance scheme is limited to 10,000 first time borrower per year. Checking if you qualify for either of these should be top of your list.

3. Do Your Research

At last count, Australia had well over 100 home loan lenders and yet, majority of us don’t look past the major banks and their sub brands, St George, Bankwest, Ubank etc when getting a mortgage (fact check: they aren’t different banks, they are just branded differently to Westpac, CBA and NAB).  

Yes, it may seem easy to just go to the bank you have your accounts with. Know this, research by the federal government productivity commission shows, this choice ends up costing most borrowers over $31,000 over the life of the loan.

Better the devil you know mentality may just turn out to be a costly mistake in deed.

Also, mortgages are very personal and you shouldn’t just go with the same one that your family and friends went with - even if they loved it - and expect it to necessarily work well for you too.

You need to consider things like whether a 'Principal and Interest loan’ or ‘Interest-only loan' is best for your situation as well as what features and benefit the product offers you.

You should compare interest rates and any on going fees you’re likely to pay for your chosen product as well. For comprehensive resources on what you will need during your home buying journey, visit our knowledge hub.

4. Ask for Help If You Need It

It’s understandable for borrowers to feel a little overwhelmed by it all, especially since you don’t apply for home loans weekly, monthly or even yearly.

That's where taking advantage of a mortgage platform like loansHub helps, we offer free phone consultation to help you on your property journey.

Not only are we able to compare home loans from over 40 different banks and assess which one best suit your needs, our technology continuously compares your loan against our panel to ensure you’re always getting a better home loan.

Not to mention it's actually a free service to you, as we're paid by the banks.

5. Have Your Paperwork Prepared

We've already mentioned the need to have proof of your savings, but you'll need a lot more paperwork than just that when you’re submitting your loan application.

Things like proof of income and any assets you may have, as well as evidence of any existing debt, and expenses you regularly have to deal with. Of course, you will also need photo ID, recent payslips and potentially your tax returns for the last two financial years.

Gathering everything ahead of time will make your home loan application journey that much smoother, and will help avoid hold-ups due to accidentally leaving anything out.

Taking a little time to get prepared before you actually submit an application will put you ahead of the game and ensure that your loan is approved faster than other finance seekers.