How to get pre-approved for a home loan

The Australian Dream of ownership in property is a common aspiration shared by many, yet the soaring real estate prices often make applying for a home loan a necessary step. Banks and lenders typically assess loans based on income, expenses and credit history, emphasising the importance of maintaining a favorable credit record.

While certain aspects of the home loan process are beyond your control, such as market conditions, there are steps you can take to enhance your application. Ensuring you have all the required documents is crucial, recognising that approval processes may vary among different lenders is also crucial, that's where Koalify’s mortgage broker experts can help.

To facilitate a smooth home loan application, consider the following tips:

1. Obtain Approval Early

Once you have approval from a lender, you have the confidence in knowing a lender is prepared to provide you a loan to help with your desired property purchase. This will involve presenting your proof of income, recent bank statements, employment details, and other essential documents for approval, a vital step in expediting the process. Koalify brokers offers a digital secure portal for swift and easy mortgage approval.

2. Your credit score is important!

Regularly check your credit rating through agencies like Equifax, Experian, or Illion. Correct any errors promptly, as lenders favor applicants with high credit scores. Paying for any credit cards, bills on time and minimising existing debts enhance your credit score. It's important not to apply to multiple lenders or credit providers in a short amount of time as this can also impact your overall credit score. Koalify mortgage brokers can run a free credit check on your behalf without impacting your credit score

3. Maintain a stable source of income

Avoid changing jobs before applying for a mortgage, as a consistent employment history strengthens your application and increases the chances of approval.  Lenders prefer borrowers with steady income, particularly those with a prolonged tenure at the same employer. However it is ok if you have had a pay rise or changed jobs recently, as Koalify has lenders on our panel that can accept short term employment. 

If you’re thinking about purchasing in the near future, speak with a Koalify mortgage broker before making any changes to your income so we can advise if this impacts your ability to obtain an approval.

4. Have your payslips and tax returns ready

Gather financial documents, including payslips, tax returns and NOA (notice of assessments) in advance. Lenders typically request at least two consecutive payslips and 1 to 2 years of tax returns.

5. Minimise any unnecessary expenses

Showcase responsible financial habits by living within your means. Limiting credit card spending, reducing credit limits, and maintaining a single credit card with a reasonable limit can positively impact your borrowing capacity. 

Lenders typically scrutinise the past three months of your spending to evaluate your borrowing capacity. To enhance your financial standing and ease the home loan application process, consider proactively curbing excessive expenditures at least six months before applying. Creating and adhering to a budget during this period not only streamlines your financial habits but also provides valuable insights into your affordability for monthly repayments when determining the size of your home loan. 

6. Save a deposit 

Aiming for a larger deposit can help strengthen your application and increase the approval chances, with lenders preferring for a deposit of at least 20%. This also helps to reduce the amount borrowed and mitigate lenders' mortgage insurance (LMI). Document your savings history, and be prepared to provide evidence of at least 5% of the purchase price.

However here at Koalify we have lender partners where we can assist you with a deposit as small as 5% and in some instances even a 0% deposit.

7. Consider a longer repayment term

While a short repayment term may seem appealing, a longer term can enhance your eligibility and loan amount, although it results in more interest payments over the loan's life.

8. Avoid applying to multiple lenders simultaneously

Multiple loan applications can adversely affect your credit history. Also applying for multiple unsecured loans (credit cards, car loans, personal loans) can adversely affect your credit history and impact the ability to obtain a home loan.

That's why it's important to speak with a Koalify mortgage broker expert who will complete comprehensive research and compare loans from over 30+ lenders before applying to increase your chances of approval.

9. Consult a mortgage broker

Engage with a mortgage broker to assess your financial status and determine your affordability. Koalify mortgage brokers helps facilitate easy calculation, comparison, and approval, ensuring your loan aligns with your goals.

10. Utilise technology for streamlined applications:

Leverage digital solutions, such as Koalify's borrowing power calculator, or repayment calculator to efficiently compare mortgage repayments. Transparency and honesty in disclosing relevant information are key to a successful application.

Navigating the home loan process requires careful consideration of various factors. Speak with a Koalify mortgage broker expert today to help provide personalised assistance in finding the right home loan for your financial needs.

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