23/05/2022
Buying Another Property - Things to Look Out and Prepare for from a Lending Perspective
Credit: Ray White North Lakes
When looking to buy a property, the focus can often be on the market and the properties listed for sale instead of strategically preparing your financial circumstances well in advance to get the property you want.
When preparing to buy a property, it is essential to clean up your finances and present yourself as a strong borrowing candidate that doesn't just include saving for a deposit. You need to be aware of the costly mistakes that can reduce your borrowing capacity (despite the deposit you have saved) or, even worse, result in you being denied by the lender. How you manage your finances can also impact on the actual interest rate. The higher your risk, the higher the rate.
Don’t finance a car or any other significant item (boat, wedding, or vacation) before buying a property, as 'new debt' can affect your credit rating, increase your debt-to-income ratio and place you in a risker borrowing category.
Reduce, consolidate, or cancel the number of credit cards in your name. Every credit card you own (and the total combined credit limits) is considered part of your total debt. Your previous balances and monthly payment habits are also considered.
Don't quit your job or change careers before purchasing your property. This can impact your income assessment and possible employment stability, as lenders want a consistent employment history of two years or more.
Don’t assume that you must save a 10%-20% deposit. Some lenders require little deposit or will take into consideration your current equity.
Research several home loan options with multiple lenders.
Know your spending limit before even looking to buy to be prepared when you see the property you want. It is imperative that you get mortgage preapproval to know the price range you can afford to buy within.
