One of the biggest hurdles you need to navigate if you’re looking to realise your home ownership dream (be it your first home, an upgrade, or even an investment property) is that of finance approval.
You can dream and plan and research all you want, but this can all be a fruitless exercise if you don’t understand what your lending capacity is, and even if a bank will consider lending you the funds you need (if any) to purchase your home
Buying a property is a marathon, not a sprint
One of the better analogies we like to use here at MAW Money is that of the journey to purchase a property, you’re going to embark on a marathon, and to be able to get the result you want, you’ll need to start training sooner rather than later!
Of course, your race all depends on how much money you’re going to bring to the table, and what size loan you’re seeking to secure – we’ll cover that a bit later, but for now, let’s talk about how you can start getting financially fit for your property purchase.
Take the time to understand the situation in its entirety before you make any decisions, and as always, seek professional financial advice.
How can you start getting financially fit?
The best way to get started is to book a consultation in with an accredited broker – this should be before you even consider house-hunting or planning. Your broker will take a very close look at your financial situation – your savings, debts, assets, liabilities, expenses, future plans and much, much more.
They’ll build a financial profile, and from that, they can start to understand whether you’re viable for a loan depending on your ability to service it. Getting this process started early is vital if you’re to secure the type of funding you need to realise your property ambitions.
Your broker will give you actionable steps that you should take if you are looking to gain successful finance approval. In some cases, it may take six or more months of disciplined spending and budgeting before you’re ready to put an application for finance in.
Some of these steps could include:
- Paying off any outstanding credit card debts and cancelling the card
- Tightening up your spending behaviour for at least six months (no Uber, AfterPay)
- Cutting any unnecessary expenditure (Netflix, Stan etc)
- Reducing car debt as much as possible if you have
- Generally being conscious with your spending and SAVING as much as possible
Why is being financially fit so important?
We cannot reinforce the importance of the above steps (especially if you’re looking to borrow 80-90% of the loan value). We have seen many banks rejecting finance due to undisciplined spending behaviour or coming back with funding offers that may not be what you need to secure the property you are seeking.
By getting financially fit, you’ll put yourself in the best position to successfully attain bank finance approval for your property purchase. You need to be able to demonstrate you can service your loan successfully, and high expenditure/debts will impact your serviceability score when you are being assessed for finance.
If you’re considering embarking on your home ownership journey, be it your first home, an upgrade, or an investment property, now might be the best time to speak with MAW Money. Lending criteria is starting to tighten after a few months of ‘looseness’. Banks are also having to assess borrowers against higher serviceability rates (set by APRA) which may impact your total borrow.
To learn more, get in touch today!
Ready to get started with your home loan application? Get in touch with our team today for an obligation-free chat.
