Securing a home loan can feel like threading a needle blindfolded. So today, we’re here to shed some light on the key checkpoints lenders examine before stamping that coveted home loan approval.
Income and Home Loans
Your income plays a large part in determining whether you get approved for a home loan and how much you can borrow. You need to provide sufficient evidence of the income you are earning. Banks accept different types of income as long as it is consistent. Income stability is a very important aspect of eligibility as it shows you can repay the home loan.
Savings and Home Loans
Having a chunk of change in your savings account is a good start, but lenders are after more than just a rainy day fund. Lenders want to see evidence of at least three to six months’ regular savings. The evidence of your regular savings shows the lender that you are financially disciplined enough to be able to meet your monthly repayment for your home loan.
Previous Loan Repayment History and Home Loans
Lenders will check whether you have a good record of paying off your loans. If you have a history of defaults or continuous late loan repayments, you have a lower chance of approval for your home loan. However, timely loan repayments mean you have a good record of meeting loan obligations. Lenders see you as a low-risk investment in the realm of home loans.
Employment Status and Home Loans
Lenders seek borrowers with stable jobs and consistent income, especially when it comes to home loans. Most lenders prefer to see that you have been in a full-time job for at least three months and have completed any probationary period. Lenders are more reluctant to provide home loans to people with casual employment or who have been working irregular hours because their income is less certain. They also strictly assess self-employed borrowers and often deny home loans to people who have been self-employed for less than a year, as they don’t yet have tax returns to prove their income. It’s also hard for people with unusual employment, such as those with multiple part-time jobs and contract workers, to qualify under the banks’ lending criteria.
Credit Score and Home Loans
Your credit score is a silent judge for home loan eligibility. A good score signals reliability, ensuring lenders that you’re capable of repaying the home loan without breaking a sweat. Credit score numbers are between zero and either 1000 or 1200. The higher the number, the better your credit score for home loans.
Age and Home Loans
Age isn’t just a number when it comes to home loans. While there’s no maximum age limit, lenders start raising their eyebrows around 55. Their main concern would be if the home loan term extends beyond your retirement age. In this case, they will assess your escape plan during your serviceability, because they need to know how you plan on meeting repayments when your income stops after retirement. If you have enough assets, good savings, and a good credit score, even home loans for older people shouldn’t be a problem.
Property Details and Home Loans
The property you are purchasing is the security for your home loan. Lenders will assess the quality of the property. They will look at whether it is in a good location and is likely to increase in value over time. They will examine its condition, features, and market value and decide how much they are willing to lend you to purchase the property. Lenders do not waste time approving home loans for properties that do not meet their eligibility requirements.
In conclusion, getting a home loan approval is a pragmatic process. So, as you navigate this financial landscape, keep these factors in mind, and you’ll be well on your way to securing the keys to your dream home. For any queries about home loans, do not hesitate to get in contact with Michael at michael@afmservices.com.au.
