When it comes to buying property in Australia, prospective home buyers face a number of challenges. While some may be struggling to save a big enough deposit, others are restricted by affordability in the wake of rising interest rates and a higher cost of living. For most, economic uncertainty and tighter lending conditions have made it harder than ever to secure finance. Here are some tips on how to prepare your finances ahead of applying for a mortgage in 2023.

What changes to lending can we expect in 2023?

• With interest rate and cost of living increases, lenders will be taking more care than ever to ensure they are not writing unaffordable mortgages that set people up to fail.
• Lenders are becoming less conservative in counting expected rental income when assessing loan applications, which could boost borrowing power for those applicants with large rental incomes, typically seeking investment loans.
• Climate change concerns that leave lenders more vulnerable to economic downturns would see lenders reducing lending to households and businesses in parts of Australia at greater risk of extreme weather events as a result of the climate crisis.
• Treasury is currently seeking feedback on improving the regulation of ‘Buy Now, Pay Later’ (BNPL) services in Australia, which are currently not subject to certain requirements under the Credit Act, including adhering to responsible lending obligations or holding an Australian Credit Licence. Any changes to regulations are likely to have an impact on lending requirements when it comes to borrowers with BNPL debt.
• In addition to slower economic growth affecting spending and businesses, more borrowers are likely to experience mortgage stress going into 2023. 

How can you get loan ready in 2023?

There’s no doubt that lenders have seriously cracked down on home lending. To minimize the chances of your mortgage application getting knocked back or delayed, it’s vital prospective home buyers consider every dollar spent.

• Critically assess expenses prior to applying for a home loan and change any spending habits that may be viewed by lenders in a negative light or that could hinder your chances of being approved for a loan. Ideally, do this for at least 3 months before applying for a mortgage.
• Cut back – or avoid – Afterpay or other BNPL purchases as these could seriously hurt your chances of being approved for a loan. Work on reducing this debt by paying it down as soon as you can.
• Be honest and ready to disclose everything that involves your finances, including your income, savings, investments, expenses, existing debts and any other financial commitments.
• To prove to lenders that you have a clean and stable financial track record, ensure your credit rating portrays you as the ideal borrower. Repay your debt on time and in full and avoid missing repayments or making late repayments.
• Reduce your credit card limit and stick to just one credit card with a reasonable limit. The higher your limit, the less money lenders can responsibly lend to you.
• Job stability is important to lenders so ideally you want to be in the same job for at least six months, or if you have recently changed jobs, in a previous similar role for a minimum of two years.
• Keep squirrelling away any savings for your deposit, and if possible save 20 per cent of the purchase price of a property to avoid having to pay LMI. The bigger your deposit, the less you have to borrow, so the lower the risk you are to a lender. 

Where can you go to get more first home buyer help?

For more first home buyer help with saving a deposit, take a look at these Government-backed schemes:

• First Home Owner Grant – A one-off grant payable to first home owners who satisfy all the eligibility criteria.
• First Home Guarantee Scheme - Part of an eligible first home buyer’s home loan from a Participating Lender is guaranteed by NHFIC, enabling eligible home buyers to buy a home with as little as 5% deposit without paying Lenders Mortgage Insurance.
• First Home Super Saver Scheme - Apply to have a maximum of $15,000 of your voluntary contributions from any one financial year included in your eligible contributions to be released under the FHSS scheme, up to a total of $50,000 contributions across all years. 

How can Mortgage Express brokers assist you?

We’ll work with you to:

• ASSESS your needs and unique financial position, then recommend loan options and strategies.
• EXPLAIN the entire process from start (Application) to finish (Settlement).
• ASSIST with all paperwork required. Before submitting your application, we will look at your living expenses in the same way lenders’ credit assessors would and ask you about the spending habits which could decrease your chances of getting a loan approved.
• COLLABORATE with all those involved in purchasing your home such as solicitors, real estates and lenders.
• CONDUCT regular reviews after settlement, making sure you are supported and still enjoying the most competitive deal for your situation. 

Contact a Mortgage Express broker today to find out more about getting home loan ready in 2023.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.