Costly mistakes that you may not have considered
When looking to buy a property, the focus can often be on the market and the
properties listed for sale instead of strategically preparing your financial
circumstances well in advance to get the property you want.
When preparing to buy a property, it is essential to clean up your finances and
present yourself as a strong borrowing candidate that doesn't just include saving
for a deposit. You need to be aware of the costly mistakes that can reduce your
borrowing capacity (despite the deposit you have saved) or, even worse, result in
you being denied by the lender. How you manage your finances can also impact
on the actual interest rate. The higher your risk, the higher the rate.
Don’t finance a car or any other significant item (boat, wedding, or vacation) before
buying a property, as 'new debt' can affect your credit rating, increase your debt-
to-income ratio and place you in a risker borrowing category.
Reduce, consolidate, or cancel the number of credit cards in your name. Every
credit card you own (and the total combined credit limits) is considered part of your
total debt. Your previous balances and monthly payment habits are also
considered.
Don't quit your job or change careers before purchasing your property. This can
impact your income assessment and possible employment stability, as lenders
want a consistent employment history of two years or more.
Don’t assume that you must save a 10%-20% deposit. Some lenders require little
deposit or will take into consideration your current equity.
Research several home loan options with multiple lenders.
Know your spending limit before even looking to buy to be prepared when you see
the property you want. It is imperative that you get mortgage pre approval to know
the price range you can afford to buy within.
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