How to improve your borrowing power before applying for a home loan
If you’re planning to buy a property, your borrowing capacity will likely largely determine how much you could spend. Lenders assess a range of factors when calculating how much you could borrow, and small changes to your finances could sometimes make a meaningful difference.
Here are a few ways borrowers often improve their position before applying.
Reduce credit card limits – Even if you rarely use them, lenders assess your credit cards based on the full limit. Lowering unused limits could improve your borrowing capacity.
Pay down personal debts – Car loans, personal loans and buy now pay later balances could reduce how much you could borrow. Clearing smaller debts could help strengthen your application.
Review your spending – Lenders closely analyse living expenses. Cutting unnecessary subscriptions or discretionary spending could improve serviceability.
Avoid new credit applications – Applying for additional credit before a home loan could impact your credit report and borrowing capacity.
Build a financial buffer – Consistent savings and a healthy bank balance could demonstrate strong financial management to lenders.
A mortgage broker could review your current position and help compare your options.
DISCLAIMER
This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.
ABN 66 627 944 932
Australian Credit Licence 511699
Source: Outsource Financial