How to Prepare Your Finances for a First Home Loan

Buying your first home is exciting. But the mortgage application process can feel like an exam you weren't told about. The secret to a stress-free approval? Preparation. Banks don't just look at your income today. They look at your financial behaviour over the past three to six months. Here's exactly what to do to get your finances bank-ready.

1. Clean Up Your Bank Statements

Lenders will go through your last 3 to 6 months of bank statements. They're looking for regular savings habits and red flags like excessive discretionary spending, undisclosed debts, or late payments. Cut unnecessary subscriptions and make sure bills are paid on time. If you use Buy Now, Pay Later services like Afterpay, clear the balances and close the accounts. Banks treat these as liabilities.

2. Reduce Unnecessary Credit Limits

A $10,000 credit card limit can reduce your borrowing power by up to $50,000. Even if your balance is zero, lenders assess you on the total limit, assuming you could max it out tomorrow. Lower your limits to only what you need, or close cards you don't use.

3. Save a Genuine Deposit

Most lenders require at least 5% of the purchase price as genuine savings. That means money saved incrementally over time, not a sudden lump sum gift from your parents. The larger your deposit, the better your options and the less you'll pay in Lenders Mortgage Insurance (LMI). If you're receiving a family gift, get it into your account early so it can sit there and mature.

4. Understand Your True Borrowing Power

Online calculators are notoriously inaccurate. They don't factor in the assessment rates banks use, which are typically 3% higher than the actual interest rate to ensure you can handle rate hikes. Speak to a broker to get a realistic, to-the-dollar picture of your borrowing capacity based on current lending policies.

5. Speak to a Broker Early

Don't wait until you've found a house to start the conversation. A mortgage broker can help you map out a plan 6 to 12 months in advance, identify weaknesses in your application, and give you time to fix them. At JASKO Finance, we structure your application the way approval officers actually read it.