Buying your first home is a pretty big deal, and applying for a home loan can seem a bit intimidating. And, look, that’s fair. I get anxious asking if I can borrow $20 from someone, so the idea of walking into a bank and asking for hundreds of thousands of dollars sends a shiver down my spine.
But what if applying for a home loan and sorting out your first house didn’t have to be such a daunting task? What if someone could help you take off the pressure of the whole situation?
We spoke with ME Bank’s General Manager of Home Loans, Andrew Bartolo, to get some advice on how to sort out a home loan for your first house, and whether or not things you’ve done in the past can affect your application for a home loan.
Does always paying my rent on time mean I’ll be able to pay off a mortgage?
In theory, yes. But it really depends on your circumstances, honestly. Being able to pay on time, every time will definitely do you favours when it comes to applying for a home loan.
“How your rental history is treated varies by lender,” Bartolo explains, “But having a strong rental history, with no missed payments, is definitely a good thing. It helps prove you’ll be able to pay off your home loan on time.”
But, as we said, it depends on your circumstances. The biggest question you should ask yourself is if you’re earning enough money in the first place, so that you can afford to make those loan repayments. Will you still be able to live comfortably and pay for necessities like bills and groceries?
What is the best way to rebuild a bad credit rating?
Having a bad credit score can leave a substantial and unfortunate blemish on your home loan application.
So how can you keep your finances in shape to avoid bombing out your credit score in the first place, or fix an already bad rating?
According to Bartolo, there are a few simple principles that you should keep in the front of your mind.
One thing he recommends is to keep your spending in check, so you’re not burning through more money than you earn. Being able to show you can save money, and have some decent savings going already, will also benefit you.
Paying any outstanding debts and keeping on top of bills so they’re paid on time will go a long way to show you’re responsible with your money and payments.
Bartolo does note that sticking to these principles aren’t something you can do for a couple of weeks and then get slack with, you really need to commit: “Your lender doesn’t look at your credit history in isolation, they look at you overall as a potential borrower. They see the big picture.”
How do I know what I should be looking for when it comes to comparing home loans?
The easiest way to figure out how different home loans stack up against one another is to chat with a mortgage broker. Their job is to give you necessary advice and help you make sure your application is in the right shape.
If you want to look around and compare what loans are available to you, they’ll take care of the comparison research.
If you’re leaning towards doing that research yourself, Bartolo recommends learning about the “comparison rate”.
“Lenders are legally required to tell you their comparison rate,” Bartolo explains. “It’s the interest rate plus most fees and charges that come with the loan.”