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Applying for a home loan checklist

Co-author: Ellie McLachlan

Wanting to apply for a home loan? Here are a few tips to get you started.

What you need to get a home loan

These are the main things you need to consider before applying for a home loan to buy a new house:

  1. Research your options
  2. Provide proof of income
  3. Write a detailed budget
  4. The lender will check your credit rating
  5. The lender will check your savings history
  6. The lender will check your employment information
  7. Calculate your net worth
  8. Make a sizeable deposit of at least 20% of the purchase price

First, you need to do your research on what home loan would suit your buying situation. It’s a good idea to go through our Choosing A Home Loan Checklist before making a decision.

The table below displays a snapshot of variable rate home loan products available for first home buyers on Canstar’s database, with links to providers’ websites. The table is sorted by the current advertised interest rate (lowest-highest).

The products and Star Ratings displayed are based on a loan amount of $350,000 in NSW at 95% LVR or higher and available for Principal and interest repayments. Read the Comparison Rate Warning.

Compare Home Loans with Canstar

Then, work through the things you will need to apply for a loan in our checklist below.

Checklist: applying for a home loan

To get a home loan lenders may require a range of proofs of your current financial situation and ability to repay the loan in the future. Whether it’s your first or twenty-first loan, and whether you apply directly or through a mortgage broker, here’s a checklist of things that a lending institution may consider:

1. Can you repay the loan?

Lending institutions will want to see your proof of income. If you’re employed this will include your payslips (usually a few months’ worth of payslips), and if you’re self-employed this will include your tax returns.

If you are relying on any other income sources to repay the loan, you will need evidence of this too. For example, lease information (for rental income), shareholding statements or Centrelink statements confirming any Government benefits.

Try Our Borrowing Power Calculator

Try Our Loan Repayments Calculator

2. Do you know what your living expenses are?

You need a written budget – and need to make sure it’s realistic. If you haven’t already done a budget, try our Budget Planner Calculator.

Budget Planning Calculator

3. Is your credit rating okay?

Black marks on your credit rating could mean you’ll be charged a higher interest rate when you apply for credit. It’s a good idea to check your credit rating to make sure it is up-to-date and not affected by any incorrect information.

Your credit history is held by private credit reporting agencies such as Veda & Dun & Bradstreet. Check out our summary of how to check your credit score.

4. Do you have a savings history?

Particularly if it’s your first big loan, you’ll need to show that you don’t spend everything you earn. If you need some help saving, check out our roundup of 70 easy ways to save money.

 

More Budgeting & Saving Tips from Canstar

5. Are you in stable employment?

While a recent change of jobs won’t disqualify you from a loan, it may make it more challenging. Lenders are generally less comfortable lending to someone who has had numerous jobs or long gaps in employment. Here’s the documentation you’ll need to prove your employment status.

6. Have you considered your current net worth?

Again, make sure it’s realistic. Your net worth is essentially a grand total of all your assets minus your liabilities. Check out the Moneysmart Net Worth calculator.

7. Do you have a deposit?

You’ll need to put down a deposit and associated purchase costs. Most lenders require you to have at least a 5% deposit but if you can put 20% down you could end up paying lower interest. If you can put down more than 20% you could avoid paying Lenders Mortgage Insurance. Learn more about Lenders Mortgage Insurance.

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