Finding it harder to obtain a home loan? Don’t take it personally. The banking regulators are placing tighter limits on how much banks and other financial institutions can lend. This is largely in an effort to exert some control over Australia’s infamously high housing costs and, more generally, to reduce our historically high level of household debt.
On top of that, the banks themselves are concerned that an increase in interest rates will put more households under financial stress, leading to a rise in missed mortgage repayments.
That said, in a tighter home loan market, there are still things you can do to put yourself ahead of the pack.
Your lender will want to know all about your employment, income, assets, liabilities, credit history and more. They will want to see:
Also, be aware that lenders don’t take into account the actual amount owing on your credit cards but your total limit – i.e. the amount you would owe if you went crazy with your plastic. Cancel any unnecessary cards and reduce the credit limits on others to the level that you genuinely need.
Your financial planner can help you get your debt under control, work out a budget and establish a savings plan.
When it comes to borrowing, it’s worth talking to a licensed mortgage broker. Brokers work with many different lenders, know their policies and information requirements, and can guide you through what can be a daunting process.