So you’ve found the house of your dreams. White shutters, picket fence, nice backyard. And you have a little money saved, so you are feeling confident that you won’t struggle to get a home loan approved for the rest of it. But before you jump on that online mortgage site to see how much lenders are prepared to offer you, there are several lesser-known aspects of mortgage lending that you may be interested to know about…
1. Home loan lenders actually look to see what you spend your money on
So, that big night out at the pub last weekend? Yep, the banks and mortgage brokers will be able to see each and every dollar you spent and will most certainly make a note of it. The occasional lash out is okay, but it won’t look good if you are spending up big at expensive restaurants and nightclubs on a regular basis. So do yourself a favour, it will help when you apply for a mortgage if you withdraw cash in advance of any bug night out, so your bank statement doesn’t reflect where you actually spend the money.
2. If you own assets through a finance plan, it won’t look good for you
It may have seemed like a good idea at the time, using a finance plan to pay off that widescreen television you really wanted last year but couldn’t quite afford, and you may have even done it a few times in the past. However, if you are still in the process of paying something off it will negatively impact your credit rating. Lenders view finance plans as debt, and it thus limits the amount they are prepared to offer you.
3. Mortgage rates change constantly
If you apply for a mortgage and you aren’t happy with the rate you lender offers, maybe just wait a little while, because in a few months time they may be able to lend you a significantly larger amount. Rates are so fluid that they can even change in the space of a day. They also vary between lenders, so it is definitely worth shopping around for the right lender.
4. You are able to refinance your mortgage at a later date
In the same way you are able to shop around due to changing rates, you may be liable to apply for a ‘better’ rate even after you have begun paying off your mortgage. In other words, mortgage rates change and your credit rate improves over time. Refinancing your mortgage can be a powerful move and could end up saving you thousands of dollars over time.
5. Get your taxes in order before applying for a loan
In the same way that it helps to pay off all debt prior to a loan application, you would be well-advised to also get your taxes in order and sort out any outstanding tax returns. Almost every time, a potential lender will want to see at least two years’ worth of your tax returns, and will also request that you sign a release allowing them to verify those tax returns.
There you have it. The most important thing to be aware of is that it’s well worth doing your research before applying for a loan – it could end up saving you thousands of dollars.