The art of securing a home loan

Mortgage lenders are aggressively chasing new customers as property prices continue to strengthen in the main capitals but that doesn’t mean lending institutions are letting their credit standards slip.

The truth is that gaining approval to borrow the sum you need to buy property isn’t always as easy as the advertising campaigns of the big banks suggest. This is certainly the case if you have little equity and are asking for a loan  that requires repayments that cannot be supported by your income. But these tried-and-tested ways to prepare for a loan application will boost your chances of success:

– Equity is everything. If you own a property or part of one, or have a deposit of 20 per cent or more of the value of the asset you intend to buy, your loan application is far more likely to sail through.

– Before you approach a lender, “stress test” your finances. Can you meet the repayments if interest rates go up by 1 per cent? What happens if your income falls? What if one half of your household leaves work to have a baby?

– Borrowers must demonstrate consistency of income. Patchy employment records aren’t helpful. But it’s a competitive finance market – lenders now ask self-employed applicants for one year’s proof of financial returns. The standard used to be two years.