While some things are out of your control, showing that you have been in same place of employment (and even residence) for a long period of time shows commitment.

If you are thinking of applying for a home loan, now is not the right time to become self-employed or quit your job. You want to show lenders stability. The lender will see this as a strong indication that your current set of circumstances, from which they are determining your suitability for the loan, are not likely to change soon after the loan is approved.

To be satisfied that you can meet regular mortgage repayments, lenders want to know that your income stream is adequate. One rule of thumb is that your income is deemed adequate if your repayments can be met from 35% of your income (obviously lenders will look at your particular circumstances more closely than this).

If the lender is satisfied that you can afford the calculated repayment level, then you’ve jumped the first ‘hurdle’ towards a successful loan application.

Another hurdle is to prove that your income level is secure. An applicant can demonstrate this by their continuity of employment history. If you have recently changed to a similar job after a long stint in a similar position, that’s fine. But if you’re on probation, or have undergone a major career change (from brain surgery to carpentry), lenders may want to wait six or even twelve months.

If you’re self-employed or on a contract, lenders take confidence in your future by looking at your past. Most lenders apply the rule of averaging the income you declared to the tax office over the past two financial years. However, in some instances further information relating to the business may be requested.

Trusted Mortgage Broker has a great range of mortgage calculators to help with all those tough decisions that come with finding the right loan. Have a look at our calculators on our website to help you further. www.trustedmortgagebroker.com.au/calculators/

About the Author

Sue Hayter

Sue's service commitment is fantastic. At Trusted Mortgage Broker we work with our clients to ensure they understand their options, know exactly how much they can borrow and ensure they choose the right home loan and the right lender that is not unsuitable to their individual needs.

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