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Qualifying for Australian Home Loans

How to Qualify for Most Home Loans in Australia

It’s hard not to feel overwhelmed as a first time buyer in the current Australian housing market. In this day and age, an enormous amount of preparation and analysis goes into assessing and approving buyers for home loans in Australia. For those who aren’t familiar with the process, this can be a daunting process. If you’re just dipping your toes in the market and loan process for the first time, this guide can help you improve your odds for approval.

These are seven factors lenders examine before determining how to handle a borrower’s application for home loans in Australia.
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1. Size of deposit. As a rule of thumb, it’s a good idea to offer the largest deposit possible on the home in question. When a lender sees a large deposit offer, they assess the borrower at a lower risk. This increases your odds for approval.

2. Financial situation. Lenders are also especially interested in how you earn money, and whether you’ll be able to consistently make payments on your mortgage over a long term. Self-employed borrowers tend to be viewed as high risk, as well as those who use investing as their primary money-making strategy. Lenders like to see stability.

3. Credit score. This seems like a no-brainer, but it matters more than you’d think. A decent credit score is crucial for home loans in Australia. Of course, some lenders will also sometimes accept applicants with bad/no credit history but it’s a good idea to nurture your credit history a bit before starting the application process for Home Loan.

4. Current open balances. Even though open balances, such as phone plans or cable television subscriptions, don’t negatively affect credit as long as they’re being paid on time, lenders still want to know about them. If you’re seen as having too many open balances (or current debts) at once, they might question your ability to balance them with a mortgage payment. Try to close as many un-needed open balances before considering applying for home loans in Australia.

5. Your source(s) of income. Simply put, a low income will increase your odds for denial on a mortgage application. Lenders simply want you to be able to comfortably make payments on your home so that all parties can have peace of mind.

6. The home’s value. Home loans in Australia tend to get more complex and harder to obtain with Home Loans Calculator.
This is because there is simply more risk on the line for both the lender and buyer. Be sure to choose a home that’s within your means and budget.

7. Your age. Lastly, there are certain risks that lenders and banks use to assess applicants in accordance with their ages. For example, younger borrowers tend to have more longevity when it comes to earning money, compared to older people. This is how age is often take into consideration when lenders process applications for home loans in Australia.

Australian Home Loan Tips

Tips on Australian Home loans

One of the challenges faced by first time home buyers revolves around home financing. There is lots of uncertainty when you are considering taking out a home loan. There is a lot to choose from when it comes to Australia home loans. Your primary objective is to tip the odds in your favour so that you can get a loan approved fast. Here are key tips on Australian home loans to get you approved faster.

Create a budget

Home buying has huge cost implications. It is best to draft a budget before approaching lenders. Once you create a budget, you need to stick to it. Give yourself at least six months to establish whether you have the financial discipline to pay your loan. After this period, you can review your budget to ascertain whether it is realistic or you need to make adjustments. When creating a budget, you also need to decide on the limits. You can use a mortgage repayment calculator with the help of a real estate agent. The budget also needs to factor in upfront costs.

Keep your bank details in order

Australian home loans lenders will scrutinize your bank details before approving you for a Home Loans. As such, you need to ensure that your bank details portray you as a financially responsible person. This means that you need to take care of any late payments. Also, ensure that you do not overdraw during this period. Lenders may also ask for bank statements dating back to 6 months or even one year. It is also important to ensure that your tax information is up to date.

Pay debts and avoid taking new ones

While the lender will not expect you to have a zero balance on the credit cards, it is best to clear most of your debts. The amount you owe in debts have a huge impact your Australian home loans approval. Lenders use a debt to income ratio when approving mortgages. A high ratio can be turned down. Ideally, lenders insist that your debt obligations should not go beyond 36 percent of your total income. Your aim should be to ensure that your debt to income ratio remains low.

Save money before taking out a loan

The general requirement when applying for an Australian home loans is to make a down payment. You are likely to be turned down for a loan if you walk into a lenders office with no cash. While the housing sector in Australia is improving, lenders are still cautious, and many will not approve loans without a deposit. The minimum deposit amount differs from one lender to another. However, the industry trend among many Australian home loans providers is that most insist on a minimum of 3.5 percent as down payment. It is best to aim for a higher down payment. A higher deposit can reduce your mortgage balance and eliminate the need for private mortgage insurance.

The above tips on Australian home loans can make an otherwise complicated and strenuous home loan approval process much smoother.