Sorting Your Finances

The most important thing you need to do when preparing to buy your first home is to manage the financial part of the process early. By following the advice below, you’ll save yourself a potential headache when it’s time to apply for your home.

Check Your Debt Levels

Know how much debt you have, and get rid of what you can. Make sure you list all your debts including all credit cards and the limits on each. Remember, it’s not what you owe on your credit card but how much credit you have available that is taken into account.

By clearing your debts you’ll free up more of your cash which could allow you to borrow more on a home loan.

Check For Skeletons In Your Credit Report

You may think you’re squeaky clean but there could be a skeleton in your credit report that may have slipped your mind. Telcos (for example) are notorious for popping up on credit reports or, there could be a mark on your report that was made in error.

Your credit report is taken into account when determining your home loan application so it’s wise to clear up any issues before applying. If you find a mark on your report make sure you check it out. If you do find an error don’t freak out, just seek correction of and settle matters that may be outstanding.

If there is a mark on your record that can’t be cleared it doesn’t automatically mean that your dreams of owning your own home are over, we may be able to arrange a non-conforming mortgage for you – a loan that typically features exemptions to overly stringent credit history requirements.

How Much Can You Borrow?

Use worksheets and available online calculators to determine how much home you can afford and how much of a home loan you may qualify for. Create a budget forecast to prove to yourself that you can afford the purchase.

Get Pre-approval

Consider getting pre-approval (approval-in-principal) for your finance requirements. This is more than just a pre-qualification where a lender may state how much you may be granted based on limited information.

Pre-approval is given after a formal application has been lodged and the lender has completed a thorough evaluation, including consideration of your financial capacity and credit checks etc., of your ability to pay for a home.

Pre-approval is usually sought in advance and is given ‘in-principal’, subject to you locating the right property or in the case of your desire to attend an auction sale.