Have you started searching for a home with a dream kitchen or a perfect balcony view? However, before finding a home, you need to pay attention to the loan. How much can you borrow, and what’s the eligibility criterion? Your borrowing potential is not merely a random number or the guesswork of a lender. Your financial habits and personal circumstances shape the lender’s decision.
Thus, to obtain a home loan for your property, you must understand these factors. It will lead to smooth approval and less frustration.
Let us discuss the factors that influence your ability to obtain a home loan from ING or other Australian banks.
Credit Score
The first thing checked by a lender is the credit score of the borrower. A higher score indicates you have the ability to repay the loan on time.
A credit score refers to a 3-digit number, which proves your creditworthiness. Besides, it is related to your financial profile, such as repayment history and liabilities.
Many Australian lenders look for borrowers with a credit score of at least 650.
Employment and Income Stability
Your monthly earnings are the most important factor affecting your borrowing capacity. When you apply for a loan, your lender will ask:
- How much do you earn every month or year?
- What is the consistency of your income?
Those with steady jobs have a higher chance of getting home loan approval. On the contrary, self-employed applicants need to show a record of consistent earnings. Lenders may also check side earnings and rental income before providing the loan.
Your Deposits and Savings History
How much have you deposited in your bank’s savings account or fixed deposit account? It determines your ability to save money over a long period. The bank will check your savings of at least 3 months to understand the consistency.
A large amount of deposits means you have substantial savings. The lender will believe that you are a low-risk borrower. Your loan-to-value will also become low due to the bigger deposit.
The Length and Type of Home Loan
The loan type and length are relevant factors affecting your ability to borrow funds.
Key aspects that increase your borrowing ability are:
- No or low fees
- Low interest rate
- Longer loan terms
On the contrary, the reasons behind the decreasing borrowing power are:
- Higher interest rate
- Shorter loan terms
- Ongoing charges
Property Details
Most financial institutions in Australia will ask about the type of property for which you need a loan. To buy an under-construction home, you may get a loan at a low interest rate. Ensure that the property profile meets the eligibility criteria to receive home loan approval.
All in All
No borrower has a fixed borrowing capacity; it improves with their financial habits. Try to reduce your debt and maintain a strong credit score. These approaches will help you obtain a home loan from any lender. So, move forward confidently to start your homeownership journey. Contact the lender to learn more about the loan terms.
