You know the drill when filling in a form: it’s a tiresome process with a seemingly endless line of interrogative questions. How much do they really need to know about you? Your place of work? Your income? Favourite TV show? Dog’s name? The first street you grew up on? When will the questions and the madness end?!
Don’t sweat it. Here is a list of common things your mortgage lender will ask you when you apply for your first home loan.
What’s your annual income?
You should have two year’s worth of PAYG Payment Summary’s at the ready, and potentially even more than that if you’re self-employed. If you have any other sources of income – rent from an investment property, assets from a trust, dividends from shares and investments, or child support, for example – you’ll need to provide proof of these, too. The aim is to ensure that you look like you’re completely financially capable of paying back your mortgage on time.
You’ll also need to disclose if you’re working full-time, part-time, or working on a casual or temporary basis.
What’s your employment history?
If you’ve been in your current job for a short period – less than three years – you’ll need to prove that you’ve been an active member of the workforce for a while. Given that job-hopping every year or so is a legitimate trend amongst Generation Y, this means most people will have to provide details of past employment. If you have gaps in employment periods – for health, leisure or other reasons – these will need to be vouched for.
What other debts do you have?
I’ve mentioned this before, and I’ll say it again: knuckle down on paying off your previous debts. If you have a pile of credit card bills stashed away in a drawer that you’re ignoring, or your phone company is nagging you for month’s old bills, it’s time to quit pretending you’re travelling in the Himalayas. Because trust me, you’re not fooling anyone by pretending to go AWOL, and your credit score is likely taking a huge hit. If it looks like you’re tangled up in a web of outstanding debt, your mortgage lender needs to know how much you have owing and how you can expect to pay it off.
What’s your credit history?
Even if you’ve been super diligent in paying off your debts – great job, by the way – it will still take a while for your credit rating or credit score to improve. Read all about credit scores in this post.
How much do you have for a home loan deposit?
The longer you’ve been saving for, and the larger your down payment, the more likely a mortgage lender is going to help you get the keys to your dream home. If you have at least 25% of the property value saved, then congratulations. You’re essentially the teacher’s pet of mortgage lending. Of course, it is possible to have a smaller deposit, but you’ll end up paying extra in Lender’s Mortgage Insurance.
I have a whole blog post on how much you need for a home loan deposit over here. Be sure to check it out.
Are you buying an investment property, or buying your first home?
There’s a whole different load of regulations, requirements, rates and risks if you’re buying a property with the intention of renting it. If you’re going to get the right mortgage for your circumstances, you need to let your lender know if you plan to live in it.
It can be confusing to find out what exactly your mortgage lender is required to know about you. But the more information you can give them about your financial situation, the more likely you’ll be able to secure a mortgage that’s right for you.
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