3 Mistakes to Avoid When Applying for a Mortgage Loan

Are you considering a mortgage loan to buy a property? For most people, purchasing property is the single largest investment and purchase they will make in their lifetime. If you are unfamiliar with the process, professional advice is extremely important. The truth is, a small mistake at the start, can cost you a huge amount of time, money and possibly even a rejection of credit on your loan application.

Although the rules and procedures for lenders are similar, it is important to be aware of the specific conditions of the lender you choose. There are a number of steps to be completed and while many of them can be easily corrected without consequence along the way, others could affect your chances of a loan approval and/or the credit conditions granted by your lender.

Three common mistakes you should avoid when applying for your mortgage loan.

1) Irregularities in income & expenses

The key to securing a mortgage loan (and any other kind of loan) is to prove your capacity to pay it back, which means that lenders will ask for information and evidence as proof of your income and expenses. Based on the documents you provide, lenders approve or reject your loan. The larger the difference between your income and your expenses, the higher they view your capacity to pay the loan back. But a word of warning, many people fall into the trap of altering the information presented to lenders to increase their loan amount so they can borrow more.... Don’t do it! Pretending to have higher or lower income than you actually have can be highly counterproductive. Lenders have access to your financial information, they will cross check what you have provided with what actually happens in your bank account. If they find inconsistencies, they will reject your loan application and any offer of credit. They may even report you for providing fraudulent information - it’s against the law.

To avoid this and speed up your application, take the time to gather all your information and provide as much clear evidence as possible of your real income and expenses. It’s always helpful to look at this process long before you actually apply for loan, as reducing your expenses and showing lenders you can save your income goes a long way in their eyes. The longer you have been saving the better you look!

2) Not knowing your credit rating

Your credit history tells more about you than you think, and not being aware of your credit rating may cost you a loan approval or leave you with being offered unfavourable credit conditions that weigh heavily on benefiting and protecting the lender.

Lenders can check your credit history to evaluate your capacity to pay the loan. They make judgment of your attitude towards finances and loans, as well as your commitment to settle your debts. Lenders can make inquiries about the loans and credits you've had in the last five years and they can also see the debts you currently have including the providers of these loans. Overdue balances and missed payments on your credit report are all there for lenders to see and no one wants to lend money to someone who defaults on repayments. Lenders can access your credit card statements so can see your spending habits. Your credit history and rating ultimately influences their judgment and directly impacts whether your mortgage loan is approved or not.

If you think you might have a low credit rating, you should check your credit history before you apply for your mortgage loan with lenders. Clarify any issues and correct red flags or errors on your credit rating as soon as possible. Most importantly, seek professional advice on how you can get the best loan with a lower credit rating before you apply!

3) Applying for a loan more than once or with different lenders

Sending multiple loan applications for credit can be counterproductive. Each application you submit is recorded in your credit file and lenders can see every occasion you have tried to get a loan. This may raise a red flag to lenders as they may wonder why other financial institutions or lenders have rejected your application and denied you credit in the past. They may dig deeper and look for reasons why they also should not be loaning you money and depending on what they find they may again offer you unfavourable loan conditions to weigh in their favour, or they may simply reject any offer of credit altogether. 

Resist the urge to send multiple credit applications to multiple lenders by leaving yourself plenty of time for your loan approval and doing your research on which lender best suits your needs.

At Peasy, we can help you avoid these simple mistakes by guiding you on what lenders are looking for before you choose a lender to apply to, and we help you gather all the information you need for your application! Call us for a chat on 1800 3 PEASY or visit us at https://peasy.com.au/