Purchasing your first home can be confusing, getting organised can help. Here are 3 things that you can do today to get ready to apply for your mortgage.
Ordering your own credit report is free. You can a nice and simple indication from Credit Simple or you can get the whole report (we recommend this) from Equifax. This second option can take anywhere from a couple of days to couple of weeks to arrive. This report will allow you to see exactly what the bank is going to see about your history. If anything isn’t correct, now is the time to address that.
Look through your last 3 months of bank statements. Are you spending more than you earn or going beyond the limit of your bank account? This is called going into “unarranged overdraft”. To a bank, these 2 words send up a big red flag. Once is usually ok, but more than that and getting a mortgage is going to be difficult.
You can limit how often this happens by setting up a spending account with automatic payments going out. You’ll know exactly how much is going to be spent and how much is in the account.
Key point: don’t have an eftpos account attached to this expenses account. You’ll end up over spending and going into overdraft again.
To help you get your finances working well, download a copy of The Mortgage Lab’s Excel Budgeting Spreadsheet.
The bank is going to want to see your income and it won't usually be enough to show them the money going into your bank account. Banks like to see payslips because they show how your income is made up (ie; is it a base salary or commission). The bank will usually want to see the most recent 3 payslips so if your HR department is a little relaxed in this area, get them working on it now.
If you are self-employed, you will need to have this year's most recent financial statements (between October and March). You can see our blog on when you need to update your accounts. Since accountants are often busy, these can sometimes take a while to source so talk to your accountant early.
If you're ready to apply for a mortgage, it's also time to look at your life and health insurance. You're going to be signing a contract for a large amount of money and need to make sure you can pay for it. Find an insurance adviser who you like and feel is looking after your best interests. They should be comparing several different products and choosing the one that suits you the most.
You can start getting ready to buy today by:
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