The short answer is - it depends. It depends on whether you have your finances in order, it depends on how realistic your expectations are, and it depends on whether you are willing to look outside the “Big 4” for your finance.
There has been a tightening of lending criteria generally but, as long as your finances are in a reasonable state, there is usually a lender out there for you. For example, some lenders have postcode restrictions in Far North Queensland or won’t lend to people whose primary income is from a foreign source (i.e. FIFO workers who work in PNG but live in Australia) but other lenders are perfectly happy to lend to these same borrowers.
We find people most often run into trouble when they just talk to their current bank without considering any of the dozens of other options available on the market today. The easiest way to fix this is to talk to a mortgage broker – their job is to find you the most suitable loan based on your needs and circumstances regardless of lender. Their services shouldn’t cost you anything and there are very strict compliance requirements and regulation around the advice they give so you can trust that your best interests are at the forefront of any recommendation they make.
So, apart from talking to a mortgage broker, what else can you do to maximise your odds of receiving that all-important finance approval?
- Get a copy of your credit report and make sure all the information on there is correct. There are several sites which will provide this to you for free (usually one free report per annum), so it won’t cost you anything. If any of the information is wrong, you need to arrange for it to be corrected.
- Try to close or reduce the limits on your credit cards. When lenders look at your ability to repay a mortgage, they work on a worst-case scenario where all credit cards and lines of credit are maxed out. This means that they won’t care if you pay out your card in full each month, the lender will still assume that you have borrowed the full amount and are stuck paying that back.
- Demonstrate genuine savings. Presumably, you have already been saving like crazy to build up your deposit, but, if you haven’t, now is the time. Lenders like to see that you are able to save something above your current living expenses – it shows that you are able to live below your means and that you will have a buffer should an emergency arise.
- Reduce your living expenses. Lending criteria are primarily focused on determining whether or not a person can repay a loan on the nominated terms. A good indicator of this is the difference between your income and living expenses – if you are spending most of your money just to live, there is a higher risk that you may not be able to meet your loan commitments, particularly if something goes wrong and you can’t work for a period. To combat this, you can either increase your income or reduce your expenses, however, for most of us, reducing our living expenses is more achievable than wrangling a pay rise at work.