Single? My top 5 tips for securing a home loan
It’s a common perception that in order to convince a bank to give you a mortgage, you must have access to two incomes in order to service the loan.
Interestingly though, new statistics from the ABS suggest that’s not the case, with 25% of houses sold in Australia, sold to single people.
In addition, for several years the stats have shown that single women buy houses at double the rate of single men. Young women find that in some cases buying is as affordable as renting, while older women may seek a home solo following a divorce or the death of a partner.
Little over 30 years ago, a single woman needed a male guarantor to secure a home loan. Fortunately that’s changed, but the process for any single person can still be a challenge.
Here are my top five tips for winning over the bank:
1. Have a savings history – Showing that you can manage your expenses and save money is a big tick for lenders. The amount of money you put away can be used to meet your loan repayments and form part of your contribution to the purchase.
2. Make sure you can show ability to repay – This is a key requirement. Although an institution won’t need to see a written budget as such, they will want to explore your current living expenses and financial commitments.
3. Check your credit rating – This will give you an idea of how many times your report has been accessed in the past few years and if you have any defaults or negative repayment history recorded.
4. Cut down on unnecessary financial commitments – These can impact your application in two ways. Firstly, when you originally applied for the debt there would have been an enquiry on your credit report. Too many credit enquiries can be detrimental to your credit profile. Secondly, the credit limits on all of your cards are included in your repayments as if they are fully drawn. Before applying for a home loan, review whether your cards are still being used and if not, cancel them or reduce their limits.
5. Don’t apply with too many lenders – Submitting applications to several different lenders at once will appear on your credit report. Only submit an application after you have completed your research and have decided to go with that particular lender.