Several things have happened as a result of the banking Royal Commission, none of which have made it any easier to get a home loan.
But while bank share prices bounced back after there were no unexpected consequences, an expected consequence is the banks’ greater commitment towards due diligence – which they’ll kindly ask you to do for them.
Even more attention has now been placed on verifying actual living expenses.
That means you’ll need to prepare for when your lender looks at your bank statements to verify your expenses.
So, for three months, you’ll need to clean up your spending footprint and be a model spender.
Firstly, you’ll need some budgeting categories. So, here’s the list:
Clothing and Personal Care
Investment Properties – (outgoings)
Medical and Health
Recreation and Entertainment
Connections – (phone, pay TV etc)
Rent or Board
Now that you have the categories, plan the next three months so that your bank statements show consistency across these categories, and that you know in advance which expenses will be assigned to each category.
Next, plan for any one-off expenses that can be plausibly explained. Then explain them in writing to yourself and have your explanation ready to go. This is so these expenses can be ignored for the purposes of working out what you can afford each month. This exercise will also show you that if you can’t explain it to yourself then you won’t be able to explain it to the bank either.
The final pieces of the puzzle are knowing what your total budget needs to be, and how much regular savings you will need to demonstrate, for you to qualify for the loan you need.
That’s where your broker comes in. A quick call to your broker will verify your serviceability and give you some numbers to aim for.
At Wealthfin we’re always happy to help you plan for your next loan.