7 Essential Elements to Qualify for Finance

So you're ready to buy a property? Unless you've got the cash stashed under the mattress you will need to obtain a loan from a lender who would like to lend you the money.

Sounds straight-forward, but is it? It can be, as long as you line up your ducks and collate all the pieces of the jigsaw necessary to satisfy a lender.

The following 7 elements will help you when preparing your application for finance:

1. Credit file; This is a record of all the credit you've applied for and includes the limits and whether you pay on time. Lenders will look at this in the first instance to confirm if you're a good risk to them. If there are any defaults or judgements this will go against you, so it's a good idea to get a copy of your credit file ahead of time and fix up any discrepancies BEFORE applying.
2. Work and residential history; lenders will want 3yrs history for both and the more stable the better. If you jump ship every 6 months to new employers and housing this is not seen as stable and can go against you.
3. Deposit; you will need a minimum of 5% of the purchase price (in most instances) there are always exceptions, but this is a good rule of thumb. Plus you need to account for costs on top of this.
4. Asset position in line with your age and circumstances; If you are young and just starting out, you are not expected to have a good looking balance sheet (aka any assets). However, If you've been working 10+ years with a good income and have nothing to show for it (financially) apart from great memories, and designer jeans this will raise a few eyebrows with the lender considering whether to lend you money. They want to know you are good for it and responsible with money. If you don't have much in Super with gaps in employment, this is ok but it needs to be explained/mitigated to increase your chances of an approval.
5. Credit limits and liabilities; If you have multiple credit facilities with high limits this can go against you in several ways, mostly it will impact your chances to service a loan. Reduce limits where possible. Close cards you don't need and create a plan to eliminate bad debt. Check out the Debt Buster Program designed specifically for you to rid consumer debt. Credit card debt is debilitating and the most expensive debt that keeps people trapped.
6. Buffers and assessment rates; You will be stress-tested to ensure you can afford the repayments even if interest rates go up. Typically, you will need to prove you can repay 3% higher than the rate offered. It's always recommended to keep a buffer so while your deposit may be limited, keep something aside for un-foreseens.
7. Exit Strategy; again age-based. If you apply for a 30 year loan term (standard mortgage term) and you hit retirement age before the term expires, the lender will want to know how you plan to repay the loan. 30 yrs is a long time and anything can change, but its something they will ask if you are 40-45+yrs.

To increase your chances of approval, talk to a property loan expert: our brother business @altitudefinance