Finding the right home loan can be difficult, but filling out the home loan application can also be a process. This article will give you a hints and tips about how to apply for the loan.

Finding the Right Loan

Before you apply for a loan it is essential that you find the right loan for you. There are many loans available out there and as a result it is impossible to search through each of them individually. This section will explain how to find the best home loan that is suited to you. To find the best home loan you must:

• Use home loan comparison calculations. When you first decide you need a home loan, it can be a very big job to find the right on.
• Browse the home loans available. Once you have found some loans that may suit you it is essential to research the home loans further by reviewing our comparison tables for the types of loans which you need and want. This will give you an idea of the fees, features and costs to expect and you can also read comprehensive reviews to find out exactly how each loan works.

How to Apply

After you have made your comparisons and confirmed your home loan needs and eligibility, you get to see the result of all of that hard work because it is now time to apply. Home Loan Finder will also not leave you on your own to work out the application process, and will instead:

• Help confirm your eligibility. To make sure you are eligible, and to confirm your price range as you start to shop around for your new home, we will ask for details about your income, expenses and other debts to make sure you are eligible, and help you compile all of the documentation you need.
• Set up a meeting with the lender in person. You will be contacted by the provider a few days after the application to further discuss the loan. If you apply for a loan in person you can get all the information that you need right there on the spot. This is another way Home Loan Finder is set apart because we give you the opportunity to deal directly with your provider, rather than through a third party broker.

What Does the Security Do?

The security is a very important part of a home loan. It can affect how much money you can borrow and how much you will end up paying on the loan. This section will explain what the security is and what it can do:

• What is security? The security is a guarantee that is required by most loans. The security is essentially an asset that can be put against the loan as collateral so if you don’t pay the loan you have an asset that can pay the difference.
• What does the security do? The security will allow you to get a lot of loans that aren’t available to people without security. Furthermore, people who don’t have security may have to pay more interest when they apply for the unsecured loans. Therefore, the security will save you money while ensuring that your loan will be paid off.

When applying for a home loan it is important to find the right one and recognise that the home loan process can be a long one. Furthermore, if you are able to secure you loan when you apply the cost of the home loan can be greatly reduced.

How to Speed up the Process

By speeding up the application process you will be able to get your house quicker. This section of the article will give you some application tips that will help you speed up the application process:

• Check your identification. Before you apply for the loan be sure that you have all the required forms of identification. Furthermore, you should be sure that all the identification is up to date and valid.
• Supporting documents. To speed up the application process you should be sure to know what types of supporting documents you will need and ensure that you have them on hand. By getting these documents to the lender quickly you will be able to speed up the application process.
• Employment check. Be sure that all the contact details for your employment check are correct and up to date.

Be Honest

One of the main things that will help you get your loan application approved is being honest. This section will explain to you how you can be honest:

• Provide all details. When you provide details be sure that you give all the details. Do not leave anything out because if anything is left out it may cause you application to be rejected.
• Make sure all details are correct. Double check that all the details you have provided are correct. Any false or misleading information may cause your home loan application to be rejected.

Have a Solicitor or Conveyancer Check Documents.

Many people will get solicitors or conveyancers to check the home loan contact. This section of the article will explain what they will do and why they are important:

• What are solicitors and conveyancers. Solicitors are lawyers that are qualified to look over the home loan documents. Conveyancers are people who specialise in home loans and are probably the best people to review the home loan contact.
• How can they help you. The solicitors and conveyancers will look over the home loan contract. They will look over all the details of the contact to ensure that the legal document you are signing is correct and that there are no bad clauses in the contact. It will also be their job to explain exactly what you are getting into with the contact and how much you will have to pay. One of the benefits of getting a qualified person to review the loan is that you will get a summary of the loan which will include all the fees and charges you will have to pay.

The application process of loan can be very long. By knowing exactly what you need to provide before you begin the process you will be able to speed up the process. Furthermore, it is recommended that you get a solicitor or a conveyance to overlook the contact before you settle the loan t be sure that the loan does not cost you too much money.

The Criteria

Applying for a loan can be a long process as there are many form to fill out and many forms that will be required to be presented to finalise the loan. To get approved for a loan the lenders will generally check up on some of your personal information. This is done to ensure that you will be reliable and will pay off the loan. This article will explain what the criteria is for applying for loans and whether there is a universal method for doing this. Furthermore, this article will explain whether they will look into your partner’s details.

What will Lenders Look for in a Borrower

While different lenders may have different techniques for determining if you are eligible for a loan they will all generally look at the same things. This section of the article will explain what lenders will look at when you apply for a loan:

• Employment status. One of the main things that lenders will look at is if you are employed. The lender will look at where you are employed and even how long you have been employed by that corporation. Stable people will be favoured in this instance.
• Income. The lender will also look at what your income is. This is very important and will generally determine how much you will be allowed to borrow. If you have a large income you will be able to borrow more money.
• Repayments record over the past twelve months. One thing many providers will look for is a reliable customer. If you have other loans the provider will look at the repayment record for these loans to see how reliable you have been. If you have been reliable and made all the repayments on time you will be looked upon favourably.
• Overall credit history. Your overall credit history will be looked at by all lenders. This is very important as it will show the lender how reliable you are. The credit history will show the lender if you have any unpaid debts and also if you make your repayments on time.

Is there are Universal Method for Checking if Customers Meet Loan Criteria

All lenders will check up on the information that you have provided when you have applied for a loan. Only after they have done this will they approve or disapprove a loan. This section of the article will explain whether all lenders will use the same system or whether they will differ:

• Some formulas. Many of the larger providers will use similar formulas to determine whether you will be approved for a loan and how much you will be approved for. While the formulas will be very similar some lenders may give different weightings to different criteria.
• Judging people on merits. A lot of the smaller lenders will not use a predetermined formula to determine if someone is eligible for a loan but will judge every case on its own merits.

Will they Look at your Partners Details

If you are in a partnership then the provider may look at your partner’s details also. They will defiantly look at your partners details if they are signing up as a joint borrower. If they do look at your partners details then they will look at all the same things as they have with you.

While each provider will have different sets of criteria for applying for a loan they will all generally check the same information.

Home Loan Application Tips

When you are getting a home loan you should be sure that you are thinking ahead at all times. If you do not think ahead then you may find that you get debt that you can’t pay or that you have to rethink your loan structure. Furthermore, if you think ahead before you apply for a loan you may qualify for better loans or be approved for loans you may not have been accepted for. By thinking ahead you will be better off in the future.

What will the Lenders Look for

When you think you may be applying for a loan in the future you should start to organise your finances. Lenders will look for:

• Strong repayment history. You should make sure that you have a string repayment history on all loans that you have paid off.
• Stable income. By ensuring that you have a stable income for a long period of time you will increase your chances of getting approved for a loan. Don’t leave the workforce for an extended period of time.
• Savings. Lenders will look favourably at people who show that they can save. If you can save some money leading up to a loan application then you will be better off.
• Low levels of debt. When you apply for a loan you should be sure that you have low levels of debt. If you find that you have a lot of debt, save money and work towards reducing them. This will increase your chances of getting accepted for a home loan.
• Low credit card limits. Lenders will also look at the amount of potential debt that you can get into. If you have a high limit on your credit cards then reduce them. The lenders will be willing to offer you more money if you do so.

Asking for Extra Funds

If at any time throughout your loan you need extra money then it can be difficult. Therefore, if you think ahead then you can avoid having to ask. However, if you do have to ask you can:

• How much will lenders give. Lenders will generally be pretty wary of lending you more money. Lenders will be very reluctant to let you borrow money that will increase your debt to around 80% of the property value. If property values drop you may find that selling the house wouldn’t even cover the debt.
• Freeze repayments. Instead of borrowing money you may just want to freeze repayments. This will allow you to save the money over time and get the money that you want. You should be sure that your loan allows you to make additional repayments so you can get your loan back on track after you start paying the loan back.
• Gain equity. When you may be looking for more money you will want to get money in the cheapest way possible. If you plan ahead and build up the equity in your home you will find that the home equity loans are some of the cheapest loans going around. Make extra repayments when you can to increase the equity and pay off your loan faster.

When you are buying a home you should be sure that you think ahead. Before you apply for the loan you should have all your financials figured out so you will maximise the chances of being approved. Furthermore, if you have to borrow more money at some point there are many things that you will be able to do to make sure this isn’t an issue.

How to Avoid Rejection

There are many conditions that will have to be met before a home loan application is approved. These conditions have been tightened in the aftermath of the financial crisis as lenders want to ensure that you are a low risk borrower. However, by knowing some of the finer points of the conditions for approval you may be able to avoid rejection on your home loan application. This article will explain what you may be able to do to avoid rejection with your home loan.

Visit a Broker

While this is quite a simple tip many people will overlook the fact that getting advice can go a long way in helping you get approval. By getting advice from a broker you will be able to:

• Prepare yourself. This is the main way that brokers will be able to help you get approval for a loan and avoid rejection. Brokers will advise you on all the costs that you will be liable to pay and all the documents that you will have to provide. By knowing all of this you will be better prepared, know if you will be able to afford the loan and hopefully get approval.

Know what you Need

By knowing what you will need to get approved you will increase your chances at getting approval. This section of the article will explain what you will need to provide the lender:

• Do your paper work. Lenders will appreciate paperwork that is detailed and in order. By keeping detailed financial statements and records of income and expenditure throughout the period prior to application you will increase your chances of getting approved for a loan.
• What will you need. When you apply for a home loan you will have to provide many documents. Some of the main documents that you will have to provide will be proof of income, references and tax returns. If you are unable to provide all of these documents then you will generally not be approved for a loan.

Credit History

The credit history of a potential borrower can greatly affect your chances of approval. This section of the article will explain what you should be aware of before you apply:

• Be aware. When you apply for a home loan be sure that you don’t have any debts that are unpaid and try to pay off any debts that take some of your income. If you have unpaid debts and you pay them, late payments only account for 30% of the credit rating.
• Credit card limit. The amount of money you are able to charge to your credit card will affect your credit rating. If you are able to put a lot of money on your card this increases the chance of you getting into large debt and the lender will see this as a risk.

Order a copy of your credit file

Receive email alerts whenever specific changes occur on your credit file for 12 months. You also receive a copy of your credit file despatched within one working day.

Receive your credit file with information on:

• Details of consumer credit enquiries
• Details of overdue consumer credit accounts
• Commercial credit enquiries
• Details of overdue commercial credit accounts
• Bankruptcy & Court Judgements
• Writs & Summons
• Information on your current relationship with a credit provider

Click here to find out more about this offer

Savings Proof

If you have other savings that are not going to be used on the home loan you should bring a record of these when you apply. Many providers will look favourable upon people that have a history of saving as it will show that you are sensible with money.

By following the above advice you will be able to reduce the chance of getting a home loan rejection. When you apply for a home loan you should be sure that you know all the documents that you need and how they need to be presented. Furthermore, you should be sure get advice from a mortgage broker as they will be able to tell you exactly what will be expected from you. Start a comparison of mortgage brokers in your area now.

How to Ensure a Successful Home Loan Application

As it is presently more difficult to obtain a home loan than it was before the Global Financial Crisis (GFC), it has become important that relevant tips and guides be provided to assist potential home buyers who are wanting to refinance or buy a home before prices start increasing again.

Looking for the Right Loan

Home loan providers have developed more stringent policies over the last 12 to 18 months in regard to what they require from their home loan applicants. This has mainly been brought about as a result of home price increases slowing down throughout the country. In some areas they have even decreased. Such a movement in the housing industry has not come as a surprise as housing in Australia has been increasing in price at extraordinary levels for some time now. Levels such as 20 percent a year in some localities and levels that could not be sustained forever.

The tightening of credit has made it harder for many to qualify for a home loan in the present environment and for this reason these Tips and Guides may be of some help in getting you through the barrier.

Tips and Guides for home buying in tightening financial times:

• Bad credit issues. If you are one of those unfortunate home loan seekers who have been seeking out loans frequently but have been getting declined, you may have inadvertently got yourself into credit trouble. Your potential lender will see all your loan seeking activity recorded and be scared off wondering why nobody wants your business. Any more than two failed attempts will virtually stop you from any further consideration. Simple little bills such as unpaid phone accounts can now prevent you from getting a home loan as it is seen these days as a lack of financial discipline. Before approaching a lender make sure you pay all your outstanding bills and have an acceptable reason for why you have had your loan application declined by other lenders in the past.
• Property not acceptable as security. Some properties that home loan providers would have happily accepted as security in the past may now be viewed differently. You may find many properties in a declining market will not be accepted because it is assumed that the value may fall further and erode any equity you may have in relation to the loan you are trying to obtain. In this case you may keep looking for a lender who will accommodate you or simply wait for the situation to change.
• Lack of sufficient equity to refinance. As a result of lower property values in some areas and a lack of confidence some lenders have in a fast recovery, you may find it hard to refinance if you have anything less that 10 or 15 percent equity left in the property that you can use as security. You will get a better hearing if you can prove you have been able to save, have good money management skills and don't live off credit.
• Lack of steady employment record. Although it is not uncommon for many people to regularly switch employment in the search for better opportunities, it is frowned on by lenders in assessing your future risk as a borrower. Most lenders will insist on a pattern that shows at least a six or 12 month stay at any one job but it must be in the same industry or similar type of position.
• Proof of ability to save. Even if you can come up with the required deposit to put down on your new home, most lenders will still decline your business if you can't show your ability to have genuinely saved at least 3 percent of the deposit money (5 percent for first home buyers) during the previous three months. This is a recent innovation and is being applied rather ruthlessly at the present time. If proof of regular savings can not be shown some lenders will accept the fact that you have held the equivalent of 3 or 5 percent in your account for at least six months before applying for the home loan.

Lenders are more cautious across the board these days and if you are aware of what they are requiring you can make it much easier for yourself in having your home loan application accepted. They are all looking for a higher quality borrower along with a secured property that has a better potential for resale at an increased price. If you can't make these two criteria you will find it hard to get past first base. The best way of becoming accepted is to demonstrate that you are a worthwhile applicant and that your property is worth buying.

How To Get Your Home Loan Application Approved

Buying a home is a truly exciting experience, but it can also be pretty stressful. The first of your anxieties will be ensuring your home loan application is accepted.

Apart from those lucky enough to have the cash to pay for their new home upfront, everybody else relies on that magical “Yes” from their lender before they can start the journey to home ownership.

Here’s a guide to ensuring your home loan application has the best chance of being accepted first time.

Fill In The Forms Correctly

Many people fail in their home loan application simply because the details they enter on their application form is incorrect. The information you give be it over the phone, or on an Internet application is used to process your case, and misspellings or mistakes in your personal details could mean when a credit check is run you’ll automatically fail.

Take the time to double check all spellings and details, especially important things like your address, employment information, and date of birth.

Be Sure To Include Proof

Unless you’re applying for a lo doc loan where you don’t need to include much in the way of proof of earnings or identity, any lender you apply to will require a couple of forms of identification, along with proof of your employment and earnings; Normally in the form of payslips or bank statements.

Failure to include the correct proof along with your application could result in long delays in a decision, or in some extreme cases a flat refusal.

Check Your Credit Record

This is probably the most important thing you need to do before you apply for your home loan. All lenders will run a credit score on you to help them decide whether you are credit worthy.

They’ll look into your financial history to look for past loans, current credit commitments, and any unpaid debts you may have. Essentially they want to see how responsible you are as a borrower.

From time to time there may be small errors that appear on your credit record which can affect your ability to get credit. Previous lenders may not have registered that you’ve paid off a debt, or a company you’ve had credit from may accidentally have marked you down as a late payer.

Often these mistakes are purely administrative, yet can have a negative effect when you apply to a new lender.

By checking your own credit record before you apply for a home loan you can look for any such errors, and have them corrected. Even the smallest error could result in credit refusal so this isn’t a step you can afford to miss.

Use a Qualified Broker

Even if you feel fairly confident in your ability to apply for a home loan yourself, it may be an idea to get an independent broker to help you with your application. They’ll be able to work through your application with you, double checking all your details, and making sure everything is in place for when you submit your forms.

With thousands of home loan applications under their belt, an independent broker will have the know how and experience to get your application approved first time.

How to Speed Up Your Mortgage Application To Get A New Home Faster

There are things you can do to speed up your mortgage application, and one of the best ways to do this is to find out everything you can about mortgages. Read this article to find out how you can get into your new home faster.

Filling out a mortgage application can be very confusing if you have never done one before, and if you have done one before it can still be very hard to figure out. The fastest way to get a home loan application done and ready for processing is to know exactly what you are looking for in a mortgage before hand. This will help you get your new home faster, and you will feel 100% confident about the application.

Mortgage application tips

Here are some great tips to help you with your mortgage.

1. Always check your statements - Banks aren't always perfect and mistakes in calculation can often occur. Debit times are not always perfect and other errors can frequently happen. You are responsible for your home loan, so take the time to check your statement every month to make sure everything is in order.
2. Fees for making a payout early - Find out what your bank charges for an early payout. These fees are sometimes applied in the early years to mortgages with a variable rate.
3. Withdrawing payments - If you are thinking about withdrawing any repayments you have already made, remember that it will slow down any progress you have made paying it off considerably. You want to speed up the mortgage application process, not make it any slower.
4. Penalties on fixed rates - Early repayments may be limited or penalized during a term with a fixed-rate mortgage. Variable rate home loans usually do not have these restrictions, but it is always best to check first before signing a home loan application.
5. Decreases in rates - When you make higher payments you will not only be reducing the principle, but you will also be lowering the interest you have to pay as well. Always make the minimum repayments, while at the same time trying to add some extra money on for every payment made.
6. Watch for increases in interest rates - If it looks like the rates of interest are going to rise and you want to maintain the same repayment amount, you should talk to your lender about getting your home loan locked in at a fixed rate. One way you can tell if the interest rates may possibly be rising with your bank or financial institution is to watch the interest rates at the Reserve Bank of Australia. In most cases, if the RBA rates rise, the banks will follow suit. You may also want to consider getting a split loan which means your payments are divided between variable and fixed rates.

How to save on your home loan application

There are four things you can do to save money on your mortgage application.

1. Pay every second week - When you pay fortnightly you will be making more payments during the year. This method can take years off of your mortgage and save you thousands of dollars in interest payments. There are 26 fortnights in a year, which means that paying fortnightly will give you one extra month's payment every year. One thing you should watch for is the annual fee. These can be approximately $300 yearly, so be certain to find out how long it will take to cover this annual fee with savings on interest.
2. Look at professional packages - Some financial institutions offer a professional package that gives you a lower rate of interest. This rate can be 0.7% lower than the standard rate of interest. You may also receive free financial advice, discount insurance, credit card or transaction accounts, amongst other benefits.
3. Get a basic mortgage - You'll often get lower rates on a basic mortgage than you would on premium loans. Take a look at the extra features that are provided with premium mortgages and decide whether you really need them. If a simple mortgage is all you want, there is no reason to pay the extra cost for benefits you don't need.
4. Increase your payment amount - Paying extra, especially in the first years of your mortgage, will give you many benefits in the long run. If you calculate how much money you can save by changing how much you pay on a monthly basis, you will see what difference it can make. If you have a $400,000 variable loan with an 8.5% interest rate and 25 years left to pay, adding a $100 payment every fortnight would save you $119,000 in interest charges. You would also pay off your mortgage 4 1/2 years earlier.

A word about refinancing

You may be able to save money if you use a discount broker for refinancing. Some of these brokers will take some of the commission they get upfront from lenders and pay it to you as a rebate. On a loan for $300,000 you could possibly get back about $1000. You can also try talking to your current bank or financial institution and let them know that you can get a better deal elsewhere. Sometimes they will try to match the deal or even do it better to keep your business. Try looking around for a loan that has no application fees along with a great deal.

There can be some problems with switching to a lender that is more affordable. You may have to pay an establishment fee which can be as high as $800. Other fees may include costs for property valuation, legal costs and stamp duty fees. You may also have to pay fees for deferred establishment, which is being applied more and more at an introductory rate to borrowers.

There is no way of knowing whether the variable rate you get with your new loan will remain competitive. Honeymoon rates are only offered for a promotional period before the higher variable rate kicks back in. You will need to compare different loans and fees and the Annual Average Percentage Rates, which includes all interest charges and fees for different amounts borrowed and different loan terms.

Variable rate loans often have a rate that is 0.5% lower than the standard variable rate, but there are a lot of disadvantages to choosing one. You'll have a lot more restrictions on the loan such as only being able to make monthly payments and the ongoing fees are higher. There may also be fees for an early repayment.

An easy way to tell if you're paying too much for your home loan is to compare it to the standard variable rate at the major banks. If your rate of interest is as high, chances are you're paying more than you have to. If your loan is large enough you will usually qualify for a 0.7% discount off the standard variable rate.

Don't be afraid to start shopping around if you find that your loan is too high. Try to negotiate with your current lender, but if you can't get a better price than be prepared to look elsewhere.

Be careful

There are some schemes that you should be wary of when dealing with your mortgage. One of them is refinancing your loan into a mortgage with a line of credit. You would use a credit card for any expenses you incur on a daily basis and your salary would be deposited directly into the line of credit account. The credit card loan would be paid from that account as well. The problem with this scheme is that it offers a lot of available credit and the temptation can be too much for some people. This means that the loan is not paid off as fast as it could be, and interest rates are usually much higher.

There are some schemes that are so confusing that you cannot follow them, and this is usually because they have hidden fees and charges added on that you can't even figure out. Stick to a basic understandable loan so that you know exactly what you're dealing with at all times.

If you're happy with your current mortgage and the rates are competitive, don't fall for offers from unscrupulous lenders that are just looking to make some fast money. It can be very expensive to switch a loan, and should only be done when it is in your best interests to do so.

Debt consolidation loans should also be looked at very carefully. If you have gotten into debt, perhaps with your credit card, it can take years to pay back the loan and if anything happens you are putting your house on the line.

The 5 Cs Used In Assessing Your Home Loan Application

Banks are in the business of making money. They make money through investments and via the interest they charge on the monies they loan out. The variables concerning a bank’s approval of loans is usually based on the bank’s funding abilities. Even when the economic climate is unpredictable, however, the criteria that banks use in determining who they loan money to stays the same. These criteria are unofficially called the '5 Cs': capacity, cash, collateral, conditions, and character.

Capacity

Capacity refers to your basic ability to pay back a mortgage. The bank will look at your current income and employment history, with the main purpose of determining whether or not you make enough money to pay monthly payments on a loan. The bank will want to see payslips and verification of employment from your employer, and sometimes will request a Tax Office Assessment Notice for further verification. If you are your own employer, your bank will probably want at least 2 years worth of tax statements. In addition, you’ll probably have to provide financials and Tax Office Assessment Notices. A self employed person with under 2 years of business proof will not have much luck getting a loan, but if you’ve been in business for two or more years, and have professional documentation of solvency, you stand a much better chance of getting a mortgage loan. It proves your capacity for paying back a loan.

Cash

While cash on hand is not the most paramount consideration, you will need enough to close the transaction. You’re going to need at least 5% of the value of the property you’re purchasing, in addition to the duties and fees associated with the purchase. If you can’t prove to your bank that you have the money to pay these duties and fees, you probably won’t be able to get a loan.

Collateral

Usually, if you’re making a purchase that requires a loan, the item you’re purchasing is the collateral. In the case of a home loan, the home and property you want to purchase must be worth at least the amount of the loan. The bank will send an assessor to evaluate the condition of the property, as well as the general location. The assessor will want to know if the house you’re looking at is in a well-zoned area for residences, for instance, or if it seems to be too close to a commercial development. If it's approved, the bank will continue with the application.

Conditions

The current economic conditions in the housing market will certainly affect the success of your loan efforts. Be prepared for requests for extra security or a shorter mortgage.

Character

Character is not exactly documentable, but it can certainly be assessed. Your banker, after all of the employment and credit history, proof of employment, and cash on hand evaluation, may still have be hesitating Take a look at yourself, before he does. Do you have at least a typical number of assets for a person your age? Try to boost your own credit history for a few months before getting a loan, and don’t quit your job and start your own business on the eve of your meeting with the banker.

As you proceed with your quest for a home loan, you’ll find many stumbling blocks. However, if you go into the process prepared with the 5Cs, you stand a much better chance of success.

Your Credit History

Do You Have A Pristine Credit History?

Your credit history follows you wherever you go. You can’t even get a cell phone if you have a poor credit rating. Veda Advantage is the main credit report agency in Australia, and provides the feedback that affects whether or not you get the loan or credit you want. Veda Advantage stores all of the information on your credit history, including each enquiry from various lenders. This applies for individuals and companies alike.

What Information Is Stored?

The credit agency in charge of your information keeps track of the date, amount, and type of each credit application. All legal action is documented, as well, including defaults and bankruptcy. The only thing not documented is whether or not you were awarded the credit and are currently paying on it. The bank you are negotiating with for your new loan will probably depend on your honesty as to which loans and credit cards you received and are currently paying. They seldom ask for substantiation that you have paid off a loan. This loan payment, of course, will be figured in to your cost of living. Keep in mind, however, that if you have applied for numerous credit cards, it may look like you are desperate for credit, and this will reflect poorly on your credit history.

What Causes Poor Credit History?

You are probably aware of several things that can affect your credit rating. The number of applications you have filled out, whether or not you have defaulted on a card or loan, whether or not you have been sued or declared bankruptcy; all are reported on your credit history check. But, there are some things which can affect your credit rating that you may not be aware of.

Perhaps you have been surprised to find that you owe for a utility you haven’t used in years. This happens to some people when they move and leave a new tenant to take over utility bills. If you don’t contact the utility yourself, and take your name off the bill, you are running the risk of trusting your credit rating to a total stranger. Whoever takes over the use of that utility may or may not pay it, but it is still in your name.

If the new tenant doesn’t pay the utility bill, the company will look for you. If they find you, you’ll have to pay the bill. If they don’t find you, they will report your bill as delinquent. If you are caught in this scenario, the best you can hope for is the benefit of a doubt from your prospective lender. Of course, you will have to pay up on the bill, which is not yours in the first place, but is in your name. The bank, even if you pay the bill, will still be skeptical of loaning you money because you have proven that you are not careful with your accounts.

Can You Fix A Bad Credit Report?

Traditionally, a bad credit report takes 5 years to clear itself. There are some instances, however, in which lenders will take a second look. If the amount you were in default is under $500 and has been paid, they might consider giving you a loan. It also helps if the default was at least 2 years ago.

There are several companies that can help you repair your credit score. Some of them, for a modest fee, will alert you to changes in your credit report.

How important is my credit history when I want to apply for a loan

The first hurdle on the track to owning your first home is getting approved for finance. To get approved, your lender will look at your credit history. This is a record of your financial history and is used by lenders to assign you a ‘credit rating’. A good credit rating can make a big difference to your loan application, so read on to find out how it could affect you.

What is my credit history made up of?

Your credit history contains a lot of information about you financially, such as:

• Credit applications or enquiries you’ve made, both personally and commercially.
• Credit accounts which are open and current, including home or car loans and credit cards.
• Personal and commercial accounts which are late or overdue.
• Past bankruptcy information.
• Court judgements or court writs.

Some of this information, such as filing for bankruptcy, will be kept on your file for 7 years. Other information, like credit enquiries, applications, accounts or past court judgements will only be kept on your account for 5 years.

How important is my credit history when going for my first home loan?

Lisa Montgomery, CEO of Resi Home Loans, says an applicant’s credit history is important when applying for a home loan because there are now so many ways to have bad marks on your credit file.

‘People forget about managing their credit history because there are so many forms of credit,’ she says.

‘Times have changed - you used to only have a credit card, home loan and maybe a personal loan, usually with the same provider. Now you’ve got mobile phone bills and utilities and the management of these.’

Your credit history is part of the report supplied to your prospective lender by credit file monitoring organisations like Veda. Using this report your lender will see all of your financial information and work out how much of a risk you are, assigning you a credit rating.

Montgomery says the level of importance the banks place on your credit history depends on the rest of your application, saying ‘most lenders are open to hearing the rationale behind why things have gone pear-shaped.’

‘If everything else about your application is great, they’re usually open to explanation,’ she says.

How will my credit rating affect my home loan application?

Your credit rating gives your lender the information they need to know what kind of borrower you’ll be. If you have a good credit rating you could have access to more home loan options, and your home loan interest rates could be lower, saving you hundreds a month on your repayments.

If you have an average credit rating, you could pay higher interest rates and have less home loan options to choose from, and if you have a bad rating you may not be able to get approval for a loan at all.

Your credit rating isn’t the only factor a lender will take into account when approving or denying your home loan application, so don’t panic just yet if you’ve got a less-than-ideal record.

Other factors that affect a loan application

Montgomery says there’s ‘a whole bunch of criteria’ that goes into your loan application, including ‘the size of your deposit, your employment and employment history, and your income. It’s more flexible than you think.’

To find out more about how your credit rating is decided, have a look at our page for further information.

How can I improve my credit rating?

A good place to start is by looking at your credit file and then make sure all the information within it is correct.

It’s a good idea to do this regularly and before any financial decisions you make, so that if you apply for a loan there are no nasty surprises. If you don’t check before you apply for a loan and then get denied, you’ll also have this recorded in your credit history, so it pays to be careful.

Another interesting point to consider is whether or not to apply for any new credit products before you approach your lender to ask for a loan. If have no previous applications for a credit product on your credit report, taking out a credit card can be a good way to show your lender that you are able to service a debt. But be careful. Defaulting on a payment will put you back months in the eyes of the bank. Taking out credit soon before you apply for a loan can send a negative signal to your lender.

But as Montgomery says, the best way to make your credit file look good is to change your spending patterns.

‘If something is fundamentally wrong with your spending behaviour just fixing it on paper won’t change it. There is no get out of jail free card.

Home loan rejection

Montgomery says home loan applications are usually rejected because applicants haven’t been upfront.They may have tried to hide:

• a bad credit history
• a savings history which is not genuine, for example savings which were a gift
• employment which hasn’t been continuous or consistent
• an income which won’t be able to service repayments

Different Kinds Of Home Loans For Different Income Levels

Possibly the most important consideration in granting you a loan will be your income. The bank has to make sure that you can not only afford to make payments on your loans, but that you will be able to maintain payments in the future. The last thing the bank needs is to make home loans available to people who have a poor employment record. In fact, in the past banks have been found liable in court for loaning money to people with less than stellar work history. Because of this, a bank will estimate the increasing difficulty of paying a loan, and whether or not you will be able to keep up with it.

PAYG

If you are a Pay As You Go applicant, your salary per annum is analyzed, along with overtime pay. The overtime pay, however, must be proven to be a regular occurrence. If you do shift work, that too will be allowed, but once again, you must prove that this is typical of your employment, and not just a one-time occurrence. If you receive Centrelink payments, they will be considered as income. However, the loan will require that the children involved are eligible for Centrelink for 3 years after the loan is granted. Therefore, income from children 15 years old or older will not be considered.

Self Employment

If you're self employed, the bank will have to establish an average income. This is done by looking at your income from the last 2 years, and choosing the year with the lowest income. They will consider, however, if your business has made significantly more money in the second, most recent year. If this is the case, they will take the previous, lower income, and multiply it by 1.2 or 1.3, and use that as your highest income. Your loan will be processed accordingly. Another benefit to you is an “add back”. This occurs when you have a one-time expense during one year, such as the purchase of a work vehicle. This amount will be added back in as income. Some banks will even consider depreciation, but that will vary from lender to lender.

Calculating Liability

When your income is firmly established, whether you're PAYG or self employed, your lender will balance your income with your expenses. These will include monthly bills for which you receive statements. Cost of living and HECS are also considered in these calculations. Your lender has several options in considering your estimated cost of living, which will include, among other things, utilities, clothes, loans, and insurance policies. The Bureau of Statistics has established the Henderson Poverty Line, which is used by some lenders to determine what your cost of living will be. Other lenders will use their own standards.

Now the bank has a clear image of how much you make, how much you spend, and how much you can afford to pay on a loan. From this point, the lender will consider the impact of the loan for which you’ve applied on all of these figures. The bank will recalculate your loan with a “shaded” interest rate of 1.5% to 2%. That means they will assume an increase in the interest rate to represent the increased cost of living.

Once all of these calculations have been made, the grand total is subtracted from your income. The amount of cash remaining must be enough to make regular payments on the loan.

Employment History – What Mortgage Lenders Look For

Assessing a prospective home buyer’s employment history is a very important part of the application process. Banks want to know that you have steady income and that your employment has been regular. This is usually a strong indicator that you are able to repay your loan.

What Banks Look For

Banks have several criteria that they are looking for when assessing a person’s eligibility for a mortgage. Home loans are an enormous commitment so banks must do their due diligence in order to feel comfortable that you are a safe borrower.

Here are some things that they require:

• Permanent and full-time employment or if you are a PAYG employee then you must prove that you have been employed with the same company for at least 6 months and at least 12 months continuously in the industry that you are currently working in.
• That you complete any probationary time with a new job before applying for any loans.

These requirements can catch some first-time applicants off guard because when the job market is tenuous there is really no one that is immune to losing their job regardless of their full-time or part-time status.

However, these are the requirements from banks and their experience has told them that this is a solid indicator that a person can pay back a loan if applicants have had continuous employment with the same employer for an extended period of time. They tend to be leery of applicants who shift around from job to job every few months.

Other Factors Taken Into Consideration

Banks that have borrowers who have a limited amount of money they are able to put down towards their loan may need to have mortgage insurance as part of their loan. Because of this, mortgage insurance companies have a lot to say when it comes to whether or not you will approved for your loan as lenders are beholden to them.

If the loan to value ratio is above 80% then the borrower must have mortgage insurance. This insurance is meant to protect the lender and not the borrower but the borrower must pay for this insurance.

So, the bank must comply with what the mortgage insurance criteria is for the borrowers and this can be seen as rigid to some borrowers.

Proving Your Continuous Employment

Mortgage loan evaluators will want to see the following:

• A copy of your most current payslips and also a copy of the last 2 years payment histories. If there is a reason, the bank may need to contact your employer to verify your status of employment and how long you have been there.
• If you are a self-employed or freelance but it is within the same profession then you may need to provide an explanation for why there are so many different employers. However, if you have been recruited over to another company then you may need to provide evidence of this in order to calm any of the bank’s fears. Changing jobs frequently usually has a bad implication on your application but that is not always the case.

As you can see, it is not difficult to provide the right information for mortgage lenders to evaluate. They are within their rights to be cautious and careful to whom they lend so it is up to you to understand the requirements and make sure you have fulfilled them to the best of your knowledge.

This simply means that changing jobs can have a negative impact on an application but not in every case.

Your Employment History Makes A Great Difference On Your Home Loan

Any time you’re looking for loans, probably the first thing your banker will look at is your employment history. This is such an important factor in approving loans that banks have actually developed profiles for guidance in processing home loans, and other loans in general. The bankers know which kind of loans have defaulted or been hard to collect in the past, and all of these are programmed into a computer model that aids the bank in the review of each loan. High value borrowers have a number of distinguishing qualities in their employment history.

Quality Employment Tags

Banks like to see that their potential borrower has been at the same job for two years. While employment with the same industry is good, being with the same employer for two years is even better. It is assumed that if you’ve been at your job for 2 years, you have successfully completed any probation. If not, that could be a problem, because you have to be an employee in good standing. If you change jobs within the industry, you need to be able to prove that it was because of promotion or pay increase, rather than a demotion or lateral move. If you have changed industries altogether within the last 2 years, you need to have a good explanation.

Contract Workers

With the difficult economy across the world, industries changing, and workforce fluctuation, many people have found themselves not only out of a job, but changing industries altogether. Professionals who traditionally held office jobs and enjoyed full time status have become contract workers. Some have become consultants in their industries; others have found themselves in totally unexpected venues of employment.