Applying for a home loan: what lenders look for

Buying a home is an exciting life milestone but saving up for a deposit and searching for your perfect pad is just the beginning. When it comes time to apply for a home loan it really pays to know what lenders look for and how you can get home loan fit to boost your chances of approval before you even apply. 

Disclaimer: The information contained in this article is of a general nature only and should not be taken as financial or legal advice on any of the topics discussed. Always consult a financial adviser before making any investment decisions.

What lenders look for in an applicant

Lenders will assess your application against some key criteria to get a sense of what your borrower risk might be - that is, how likely you are (or not) to meet your repayments over the life of your loan. Financial factors such as your income and employment history, your assets and other debts, how much you’ve saved for a deposit, your property’s purchase price as well as your spending and savings habits will all be taken into account.

So what can you do to get your finances in shape before you apply? Plenty as it turns out - let’s take a look:

Calculate your borrowing power - Before you even begin to search for a property, use a borrowing calculator to find out how much you’re likely to be able to borrow based on your finances. That way you can make sure you’re looking in the right price range to avoid overreaching when it comes to debt.

Maximise your deposit - The size of your home deposit will affect something called your Loan to Value Ratio (LVR) which is a key consideration for lenders when assessing your application. The LVR refers to how much that you’re looking to borrow, as a percentage of a property’s overall purchase price. Even though it may mean saving up for longer, having a larger deposit can help your home loan approval chances. Another upside of saving a deposit of 20% or more, is that you won’t have to pay Lenders Mortgage Insurance which could save you thousands. 

Reliable income - One of the best things you can do to show a lender that you’re going to be able to cover your loan repayments is to provide proof of secure, ongoing employment with reliable earnings. A great time to ask for that pay-rise or bump up your weekly hours! Changing jobs, or going part-time before you apply? Not so much...

Did you know that with Health Professionals Bank, nurses and nursing professionals can use 100% of regular overtime (proven over 3 months) to count as income as part of your home loan application*? 

Speak to a Lending Specialist for guidance on how you could use your regular overtime hours to boost your borrowing power. 

Spend less, save more - Now’s the perfect time to review your spending habits and look for more ways to save. To get a clearer picture of your finances, go through your bank statements and enter your income and expenses into a savings planner tool to work out how much you can put aside on a regular basis.

Pay off debt - Reducing the amount of debt you already have is one of the best things you can do to get home loan fit before you apply. Lenders will look at how much debt you currently have in the form of personal loans, credit card debt and even store credit. Before you apply for a home loan, take control of your finances by paying off credit cards, reducing your credit limit and getting rid of store cards.

Find out how to set up automatic payments here.

Never miss repayments - Late or missed repayments on existing loans or credit cards can be a red-flag for lenders so making sure you pay on time and in full is super important. To help you do just that, why not set up automatic payments or SMS reminders in Internet Banking, or organise to get paid directly into your Health Professionals Bank account?

Get your ducks in a row - Get your paperwork together before you apply - you’ll need to provide proof of things like your employment status and income, as well as other financials such as bank statements and tax returns.

Need a little home loan help?

Our Lending Specialists are here to help you weigh up your options and find the best loan for your needs.

You can book a call back to talk to a Lending Specialist either at home, on the phone, or on a video call.

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*We include 100% of regular overtime for nurses (or nursing professionals) when assessing your application. Regular overtime proven over 3 months. Other credit criteria apply.