Are you intending to apply for a home loan soon? Has your home loan application been rejected in the past? Understanding certain factors that influence your attractiveness to lenders may help you boost your chances of being accepted.

3 factors influencing your home loan application – and how to fix them

There are a number of things that can have an influence on your loan applications. It’s important to be aware of these so that you can have the best chance of getting approved for home loans that you need.

In fact, there are multiple considerations when looking at how desirable you look to the big banks who are deciding whether or not to accept your application.

Buy Now Pay Later services could affect your home loan application

It may come as a surprise that services that seem too good to be true, may soon be. Buy now pay later services (BNPL) like Afterpay or Zip could soon have a damaging effect on your credit score.

Your credit score is obviously something that the banks will look at when assessing your repayment eligibility on a loan. It shows them how well you have handled your finances in the past, and therefore how you will most likely treat their loan they give you.

If you have used these services in the past, don’t stress just yet. In a recent email to mortgage brokers and lenders, Equifax states that BNPL accounts. But it’s still early days and Equifax wants to measure how much BNPL data could affect overall credit scores.

“The new BNPL Comprehensive Credit Reporting (CCR) account types will be quarantined from scores in the short term to prevent any unintended and inappropriate impact on scores. As data builds up over time, we will reassess,” Equifax explains in a FAQ here.

Although the effects of BNPL on your credit score is still under discussion, your safest bet is probably to limit your current reliance on these services. If you are in a situation where you must rely on them, ensure you are meeting your repayments on time and don’t use the services haphazardly.

Savings versus spending

Lenders usually like to see at least six months of solid saving habits. They want you to be in a solid financial standing before you are asking for money from them. It shows that you are responsible with your finances and you have enough income to satisfy strong savings habits.

Additionally, lenders like to see responsible spending. On your application, if you are spending more money on clothes in a week than you are on rent which then exceeds your listed income, this may come across as a red flag to lenders. Before applying for your loan, take a critical look at your spending and ask yourself, does this seem reasonable for someone with my income? If not, give yourself a certain percentage of your income as a spending limit on certain things.

Probationary employment

If you have recently started at a new job and you still find yourself in the probationary period, lenders may not see this as an indicator of reliable future income. This could unfortunately influence your chances of being accepted. Therefore, it is probably best to wait until you are permanently employed before applying for your loan.

We can help

The examples in this article are just a small number of possible considerations banks make when you apply for your loan. It may seem overwhelming, but most of the time these considerations also save you from not being able to pay off your loan in the future. They ensure that you are in a place financially that will allow you to stay on top of repayments and comfortably afford your dream home.

However, it can get overwhelming. That’s what we’re here for! We have the experience to know just what the banks are looking for, so we can assess your situation before they do, allowing you the time to get your finances in order before you apply. We offer ease and understanding to the loan application process, taking at least some of the stress off your shoulders. Get in contact with us to start the conversation and get one step closer to your loan application being approved!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard