The best thing that we can do to prepare ourselves for a property purchase is to try and align ourselves with the banks’ lending criteria. The very first step should almost always be to save, consistently. However, here is a guide of a few steps to take:
1. Pay off any existing unsecured debts
Any ongoing credit cards, personal loans and/or payday loans should be gone. The less unsecured lending you have, the less will be used in servicing calculations (i.e. the bank will assess you to have more income available to pay their loan back)
2. Always pay your expenses on time
Anything like rent, bills and everything else like that – you should try to ensure that you always pay this consistently and on time. Banks might ask you for some bank statements to track your expenses, so it is important to be able to show this. One of the core lending principles is also ‘character’ – which means that the banks will try to judge your character by how true you are to your commitment of paying things on time (given that you’re trying to go for a loan).
3. Save genuinely, and be disciplined about it. You should also try to save up to 20% of your property value if you can.
If it means that you need to create rolling term deposits for every $5,000.00 that you save, you should do that. This is because the banks like to see genuine savings. Some brokers will tell you that banks don’t need to see this, but that’s typically only really true if you’re willing to put your parents on the hook (i.e. make them go guarantor, which I will talk about later). Regarding the 20% deposit value, this is just so that you can look like a save bet to the banks. The banks will typically be more lenient if you have more of a deposit.
4. Try to stay employed by the same employer for 6 months or more.
This can be casual employment with some lenders, but it’s highly important to be employed for a continuous period of time, for as long as possible. Also, if you’re in an industry that has some sort of special working hours or conditions, you might be able to work with lending specialists (for example, you should go to the health division of your bank if you’re a doctor – this is because ordinary lending officers might not understand about the way your pay is structured).
5. Check what type of property you’re aiming for, but be careful.
Banks typically don’t allow properties with an area that’s less than 50 metres square to be used as security for their loans. This is in reference to internal areas, so balconies aren’t even counted in that most of the time. You also can’t really get away with it because the banks will value the property as part of the lending process.
That’s all for now folks, prepare these things and then I would say you should speak to a good, reputable mortgage broker.