12 Apr Things to Avoid After Getting Pre-approved
With property prices starting to recover and the RBA slowing their rate hikes, confidence is coming back into the property market and that means buyers will be getting ready to make their next purchase.
The first step that all home buyers need to take before they begin the search is to get a pre-approval. Once preapproved, buyers are able to get a clearer picture of what they can afford which can make the process far easier.
However, once you are preapproved, there are some things you need to be aware of as they could hurt your chances of getting formal approval if your circumstances change.
The key factor that most lenders want to see is that you have a steady and reliable form of income to help you service your mortgage. If you’re thinking about changing jobs, it might be a good idea to hold off if you want to buy a home or at the very least speak with your mortgage broker in Melbourne to see if it will impact your chances of being approved by a lender.
Oftentimes a lender will be OK with a change of jobs if it is in the same industry. However, if it is a big change, or you reduce your hours or income levels then it might have a negative impact on your borrowing capacity. Talking to a mortgage broker first is important.
If you have other debts or things like credit cards, it’s important to stay on top of them while you’re looking for a home. If you miss payments or don’t pay your bills on time, it can impact your credit rating. Your lender will want to see a steady track record of paying your debts on time, as this gives them confidence in you as a borrower.
Paying your debts on time is a good habit to be in and is something that you should always aspire to do.
If you’re trying to make a big purchase like a house, you should not be taking on new debts in the short term. Things like new cars or personal loans for holidays will have to wait as they will certainly impact your borrowing capacity.
Every new debt is a cost that you need to pay which reduces your capacity to pay off a mortgage. Prioritise your new home and wait until you are in a stronger financial position to take on more debt.
At the same time, even if you apply for credit elsewhere, the application alone will actually reduce your credit score. So be careful about how you use debt. Even a new credit card might have a negative impact.
Maintain your savings
Lenders like to see that you have some solid savings built up that you can put down as a home deposit. But they also like to see that you are someone who can manage money effectively and is able to maintain some cash in the bank.
Just because you are preapproved, doesn’t mean you can go out and whittle down your savings. You don’t want to be increasing your monthly expenses either because lenders will also be looking at your ongoing living expenses and if it jumps that will impact your borrowing capacity.
If you’re looking to buy a home, you need to work hard towards that goal and until you have the keys in your hands.
Are you currently in the market for a new property? Get a clear understanding of how much that property might be worth with our free property report.