How good do you look to lenders out there?….
Whenever you apply for finance of any kind, be it a credit card, personal loan or a home loan, the lender will consider you as a potential risk.
They will conduct a credit report check and consider the risk they face by looking at what they term as the 5 C’s.
- CAPITAL: assessment of your current financial position.
- CAPACITY: your ability to repay the loan.
- CHARACTER: your stability, history and reliability.
- CONDITIONS & COMMONSENSE: the prevailing operating environment that is likely to impact you ie. industry/economic conditions.
- COLLATERAL: security that is able to be pledged to support the loan.
It is a great idea to look at your own situation before applying for a home loan in order to make the process a lot easier and less stressful. You need to think like a lender. To start with look at your financial situation. Know your income and your expenses.
How is your financial situation?
- Do you have permanent employment?
- Has your employment been stable?
- Do you have a good savings history?
- Have you paid your debts according to the contract?
- What are you wanting to purchase?
- Are you able to comfortably repay the home loan you are applying for?
To help you determine what your repayments will be you will be, use our home loan calculators
You can also review your own credit reference. This is a record of your credit history over the past 5 years. It lists any loan enquiries or applications you have made, if you have had any defaults on your credit cards or home loans (failure to pay), if you have been declared bankrupt or if you have any outstanding unpaid bills. Your credit reference can be purchased from mycreditfile.com.au.
If your credit reference shows any problems this will obviously affect your ability to borrow money. Each lender has their own credit policy in relation to defaults, arrears and unpaid debts, so it is important to be honest and upfront in the beginning rather than have it come to the lender’s attention when they conduct their own credit checks.
If your credit rating is not squeeky clean, dont be too concerned. That does not necessarily mean you will not get a home loan approval.
Advise your mortgage broker of your credit rating prior to your application they will find the best lender to fit your circumstances.
Something to think about
Do you have a positive nett asset position, ie: are your assets worth more than your debt?