GETTING THE BANK TO SAY YES

For many first-time home buyers, the most stressful part of the process is not determining which house to buy, or how much to offer, or whether to get a construction report or not.
It’s the whole process of getting the bank to say “yes” to lending what it probably seems like a pretty crazy amount of money.
You’ve been saving hard to get the deposit to get you started, but now you need a bank to take you the rest of the way with a loan.
One of the first things you will need to do is determine what type of environment in which banks currently operate.
A broker can give you a good orientation on this subject. Sometimes things are really the strict restrictions on the loan-to-value ratio are severe and the banks are severely limited in what they can do. Other times (2020, anyone?), the rules are relaxed enough and the banks have a lot more freedom to give money to the the borrowers they think look like a good bet.
When credit is tight-maybe banks are only allowed to give a relatively small proportion of their new loans to borrowers with low deposit — you may find it easier to get a loan after you have already had a offer accepted (conditional on financing, of course). When things are freer, you might be able to get a pre-approval that gives you tips that you can spend up to a certain amount and be relatively confident that the bank will give you the money.
It should be noted, however, that even if you have a pre-approval, you should always condition any agreement on financing because banks like to check the property they are financing before sending the money.
To get this very important “yes”, banks are usually looking for two things — that you have enough money for a deposit to meet their needs (or equity in the agreement if you pull the safety by the way), and that you can afford to repay the loan now and potentially for the remainder of the loan term. It could be about 30 years of your life — no big deal!

Here are some things you can do to increase your chances of success.
1-Show your savings
When it comes to the deposit, lenders usually want to see that you have you saved some of the money yourself.
You don’t necessarily have to have skimped and fought for the entire 20 percent, but having saved at least 5 percent of the purchase price by regularly putting money aside with your salary shows them that you know how to manage your money.
Even if you receive a large amount of money from your parents, the bank will want to see that you know how to do things like “do you pay first’ and work towards a savings goal.
This proof of regular and intentional savings gives them more confidence than you are a good option and it is unlikely that you will fall behind on your repayments.
2-Show that you can afford it Mortgage broker John Bolton says this is a good starting point for proving that you can repay the loan means starting to repay now. He says that’s what you have to prove that you can afford it, and every dollar you spending instead of saving will potentially make it harder for you so.
You can calculate your likely loan repayments by taking the amount you think what it will cost to buy the house, subtracting your deposit to get the loan amount you will need, then using an online mortgage calculator to work what the refunds will probably be.
Sorted has an excellent online calculator that allows you to check what the repayments will relate to various interest rates. Most banking websites also have a loan calculator.
For this exercise, you must use an interest rate higher than the rate the bank advertises. This is because you may not be able to access the bank’s promotions, and the bank will apply its own higher test rate to the application anyway (more on that in a minute).
When the calculator indicates the likely amount of the refund, you will see what you have to start paying. If it is less than your current rent, you do not have to do anything — you are already showing that you can honor payments. But if it’s more, start putting at least the difference in savings every week to show that it fits into your current budget and that it is manageable for you.

Councillor Glen McLeod explains ‘”If you pay a rent of $700 a week at the moment and you opt for a mortgage that requires repayments to $1000 is an extra $300 a week. Where is it in your expenses? Have you is that still there? It may be that you don’t, so the bank will ask you where this money comes from.’
You will also need to leave room in your budget for things like rates and maintenance of insurance. These are not a problem when you rent, but it will be come to you quickly when you become a homeowner.
3-Pay off your debt Consumer debt is not your friend when you apply for a home loan. Lenders will raise eyebrows if you send via an app that lists a lot of vehicle financing, lease purchases or other personal loans. (This does not mean this means that you should not disclose them if you have them — one of the fastest the ways to get rejected are to lie about your application.)
In addition to being expensive to repay, consumer loans are an ongoing problem commitment that drains the amount of money you have available to pay your real estate loan. And having a lot of these loans could make a bank wonder why either way, you turn to debt to finance your purchases.
You will also probably have to reduce your use of buy-now-pay-later platforms. During the most difficult period of banking rules introduced by the Law on Credit Contracts and Consumer Credit in December 2021, borrowers reported that the banks were not satisfied with having used the services not at all, even if the purchases had been easily refunded.
These rules (which require banks to be stricter in determining that people can afford the loans they take out) have been tempered in the midst of 2022, and some of the brokers I spoke to were skeptical about this after the payment would really ruin anyone’s chances, but it’s a good idea not to have many different Afterpay and Laybuy payments fly out every fortnight.
Some of the immediate purchase and subsequent payment platforms allow you to work up to enough high spending limits, and banks usually assume in their calculations that you will maximize your allowance. Canceling your accounts at the moment is an easy way to clean up your finances and your mortgage application.
Apart from what banks think of them, platforms can do a lot easier to spend more than you normally would if you paid in advance with money that you had already saved.
“A student loan absorbs 12% of every dollar you earn over the repayment threshold. If you make $80,000 a year, that’s about $600 a year month, which would give you about $95,000 more in borrowing power.’
Even if paying off your other debts reduces your deposit by 18% to 15% is probably still a good decision, he says. ‘Anything between 10 percent and 20 percent is considered “low deposit” and banks do not really think about which end of this scale you are on — they will treat all those quite similar applications.’
Bolton says that if you comfortably exceed 10% of the purchase price you intend to pay, but you don’t have much hope of getting to 20 per hundred before you buy, you might have more to gain if you pay off your debt and free up your income to cover larger home loan repayments.