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Home Loans – What can you do to maximise your chance of approval?

For some, applying for a home loan, car loan, credit card or other loans can be an arduous task, as well as a confusing one. Things like bad credit, poor paperwork maintenance, or a lack of employment stability can all contribute to unsuccessful finance applications – but it doesn’t have to be an uphill battle. While navigating the world of finance may feel like you don’t have much control, there are plenty of things you can do to maximise the chances of your loan application being approved, including (but not limited to) the following…

Engage a broker

There’s no reason to go it alone! Brokers will not charge for their time, knowledge or experience (as their payment comes from the lender); but they may be able to open up a whole new set of options for you.

Brokers are also great at helping people who have found it difficult to get finance in the past, whether due to poor credit, inconsistent employment or other issues, and present them with different lending facilities to accommodate their situation. Read here how brokers can make finance a breeze – particularly in a time when banks are not quite as forthcoming with finance as they used to be.

Having a broker on your side means you’ll get the best deal for your situation, at a rate you can afford and someone who will be there to review your loans should or if your situation changes eg. new job, baby, marriage etc.

Organise your paperwork

As you’re likely aware, applying for a loan generally means providing lenders with paperwork regarding your financial history and current position. This helps them determine the risk associated with lending you money, and ultimately influences the final outcome of the application. A good way to get on top of this before you even put in an application for finance is to ensure that you have a consistent record of recent payslips from your employer, around the last 3-4 should suffice (if you are a PAYG employee); or the last two years of tax returns (if you’re self-employed or a contractor).

It’s also handy to keep a hold of the details of any other loans you may have, including the amount, repayments, length and terms; and credit card statements (if applicable).

Getting all of this information together before you even begin the application process can cut down on unnecessary delays.

Be realistic

Having a grand vision for what you want to do with money in your life is great, however it’s important to remain realistic.

Many people have dug themselves deeper and deeper into bad debt because they want the latest gadgets, fastest cars or most extravagant homes – but at a cost they can’t realistically afford to repay. Be aware of your borrowing capacity, including accurate projections of your income vs. your expenses or any large upcoming bills, and ensure that you only apply for a loan that you can truly afford to make payments on.

Simply putting  into perspective what you want compared to what you really need reduces the risk that you’ll be over-borrowing and over-extending yourself – and ultimately causing more financial stress down the line.

As lenders look at your financial situation to determine whether or not they’ll approve your loan, a realistic starting point can help you get off on the right foot.

Continue to save

Quite often, lenders will look at your savings as part of the process. If you can show that you’re proactively saving money and creating a financial safety net for yourself, this can only help your application and also put you in good stead to handle any upfront costs that are associated with some loans. Extra savings also come in handy when it comes to dealing with the hidden costs of buying a house or apartment.

Lenders understandably prefer to look after those who are financially responsible and have the means to maintain their payments even if incoming cash drops. If you have a decent amount of savings at the time of submitting an application, continuing to put money aside for a rainy day not only looks good to the banks, but is a great habit to be in generally.

If you’d like to speak to a McKinley Plowman Finance team member today, give us a call on 08 9301 2200 or visit www.mckinleyplowman.com.au and get in touch via our online booking system.

written by:

Paul Moran

Paul has over 35 years of experience in finding financial solutions for homebuyers, investors and business owners.
A licensed broker and member of the Mortgage & Finance Association of Australia (MFAA), Paul’s extensive experience includes 20 years with a major bank, seven of which were as commercial banking manager.
Paul delivers a holistic financial solutions to achieve the best possible outcome for a client’s personal or commercial lending needs. Paul also provides a comprehensive financial consultancy to business owners on commercial, equipment and invoice finance.