Did you know that your everyday expenses could hold you back from getting your next home loan? Over the last 6 months, banks have been tightening their lending criteria and looking deeper into applicant’s finances than ever before. And you’re not exempt even if you’ve saved a decent deposit or are earning a high income.
Credit card limits matter
Banks will look deeper into your credit cards, especially your credit card limit. For most people, their credit card limits creep up over time – banks are very good at inviting you to raise your limits slowly but steadily. You might have ignored this thinking that you would never actually charge $10,000 to your credit card.
However, when working out your capacity to pay back a home loan, lenders use your full limits as part of their calculation, so reduce your credit card limit well before you are thinking of applying for a loan.
The lender decides what counts
Lenders are looking deeper into your spending, searching for items which have become a personal staple for you based on your recent history. They’re looking for spending patterns which might be of interest, so keep an eye out for:
– Afterpay, Zip Pay and similar transactions. Buy now, pay later can be very convenient, but frequent users should consider cutting down in the months before applying for a home loan.
– Repeat transactions that have become a habit. Use Frollo to add up your Uber Rides and EATS, as well as alcohol and entertainment spending
– Gambling – Even if you aren’t gambling often, spending on gambling is a red flag for lenders – especially now that lending criteria have tightened further.
Get in shape with Frollo
All the things mentioned above are made easier with the help of Frollo. For starters, since we automatically categorise your spending – you can very quickly see your expenses over the last 12 months and where you need to cut back.
Take this a step further by setting a budget to automatically track and reduce your living and lifestyle spending.
And start saving today by starting a weekly challenge to save money on groceries, catch more public transport as well as reducing your telco bills – all expense categories which lenders will focus on.
– More than ever, your past is as important as your present in convincing a lender you’re going to pay back a home loan in the future
– Get yourself in shape in the 6 months leading up to your loan application – lenders will look back further, but recent history matters most.
– The size of your deposit and income don’t matter as much as they used to – it’s all about your capacity to repay, and all of your expenses that will come under the microscope.
– It’s not all doom and gloom – Most of the tips mentioned above will help you save money and feel better about your finances – and with Frollo here to keep you motivated and make it fun – you can’t go wrong!