One of the most important things we find clients want to know is how much they can borrow. Many have used simple online calculators. These online calculators are a very quick and simple way of getting a rough calculation. But it is important to realise that most lenders look at a wide number of factors when determining your borrowing capacity.
Here are some of the things that lenders will look at:
- Your current income: they not only want to know how much you currently earn but will also want to know things like your last tax return.
- Your employment history: they do not want your full CV but they will need to know how long you have been in your current role and if it is less than 2 years, then they will want to know your past roles.
- Your employment status: lenders will want to know if you are permanent or on a contract. If you are part-time or casual, that is ok so don’t be concerned about this.
- Your savings history: many lenders need to know that you have a history of saving. This is particularly important for first home buyers. Lenders will usually ask for 3-6 months of savings evidence such as bank records.
- All debt: lenders need to know what other debt and therefore commitments that you might have – this will included all credit cards, personal loans and in some cases any financial arrangements with the ATO and Centrelink.
- Your debt capacity: whilst you may not have any personal debt, banks like to know how much debt you are able to get in to. This means that they will want to know the limit on all your credit cards and the redraw ability on your personal loans.
- Your credit history: lenders will access your credit file to see if you have any defaults. This is not necessarily the end of the road for your application but you may need to discuss it.
- Your marital status or living arrangements: This is particularly important if you are borrowing as a couple. Lenders will look for a history that show you are a couple and are likely to remain so.
- Dependents: having children or being responsible for children can add significantly to your financial commitments. Lenders will be interested in understanding this.
- Other expenses: Most lenders like to get an idea of what your usual expenses are as a way of gauging your financial commitments.
Remember, all of these items are intended to act as a guide. The simplest way to determine your borrowing capacity is to talk to us. We can chat through all of these items and find the right lender to suit your personal circumstances.