There have been many changes made to the processes and guidelines that banks and lenders are following in assessing home loan applications. Whilst it is now more difficult than before to secure a home loan approval, there are many things you can do to improve your chances of success.

Here are 5 of the top ways to ensure that your application is approved in a timely manner with great terms.

1.     Don’t apply with too many lenders

Whilst it is imperative that home loan customers compare the market, applying with too many lenders can have serious negative impacts on your chances on being approved. Each time you submit an application with a lender this is recorded on your credit report, even if you are not rejected. Too many applications bring down your overall credit score, as many lenders see this as erratic behaviour.

The best thing to do, is conduct thorough research into your options and enlist the help of an experienced mortgage broker who will be able to direct you to the channels of lending that are most likely to approve your application under the most favourable terms. Don’t go it alone. Get help and be rewarded in the long run.

2.    Be ready to show your ability to repay

One of the best things you can do to improve your chances of application approval is to be mindful in the months leading up to your application about your spending and spare income. Banks will review your spending habits and take this into account when assessing your ability to service a loan.

Try to minimise any unnecessary or large expenses in the time leading up. This is making your overall income vs expense ratio more positive which will improve your chances of approval. Banks want to see that you will be able to both service your loan whilst still living your life.

Take the opportunity to discuss your spending habits with a mortgage broker and identify what areas might impact you the most when it comes time to apply. Some small changes can have big impacts in the future.

3.     Be consistent in your savings

Banks love to see that you are able to not only pay your bills and make ends meet, but also to have a strong and consistent behaviour of saving. Savings can help increase your deposit for the home loan itself, but also prove additional capacity when it comes to making repayments. Where possible, set an achievable savings goal and regularly make transfers into a savings account. It is also important where possible to not redraw on this amount leading up to your loan application.

If you haven’t already, speak to a mortgage broker to find out what repayments might look like for your desired loan amount. After you understand the numbers, make sure that your rent, and savings at least covers this amount, with an extra amount in for buffer. This will greatly improve your chances of success when it comes time to apply.

4.     Think about your employment situation

If you are considering applying for a home loan in the near future, now would not be the time to consider changing your employer. Banks like consistency and being consistently employed by the same company for an extended period is a big tick in the box for banks. This shows job security and minimises the risk for banks when it comes to assessing your income. For those of you who might be self-employed, think about your tax returns and showing a consistent and upwardly trending income if possible.

Whilst it is harder to gain approval if you are self-employed, there are many things you can do to ensure that doesn’t play to much against you in your application. Be consistent, always complete your tax returns and ensure you are showing a solid income from your work.

5.     Eliminate unnecessary financial commitments

Ongoing financial commitments are a major factor in assessing your expenses. We all have ongoing financial commitments that are either largely discretionary or can be largely eliminated. Things like store charge cards, credit cards, memberships and subscriptions should all be reviewed, with the goal of eliminating and consolidating as much as possible. Whilst a credit card is a great facility to help manage your everyday cashflow, they are a red flag for lenders as this increases your ability as a customer to over extend yourself.

Review your current charge and credit cards and try to consolidate into a single facility if possible. Also leading up to your application, try to minimise other ongoing subscriptions such as gym memberships, wine of the month club subscriptions or ongoing donations. These recurring transactions are considered financial commitments and could be a liability when assessing your application.

In summary, being prepared well in advance will help both first home buyers and investors ensure that they are giving themselves the best possible chance of success when it comes to being approved for their loans. A few small changes now can have big impacts in the future.

If you would like to know more, or discuss your personal situation, you should reach out to an experienced mortgage broker for advice. They will be able to provide you with independent advice and experience on the best ways for you to improve your chances of being approved.