Don't make these 5 mistakes when applying for a mortgage

Looking to buy your first home in Australia? Land the home loan you want - on the terms you want - by avoiding these common mistakes.

Mistake #1: Not researching options

One of the biggest mistakes people make when applying for a mortgage is not comparing all the options available to them. It's the same policy that applies to buying anything - except a house is a massive investment you'll be paying off for many years, so the stakes are higher.

By examining several different options, you can land the loan that's best suited to you. 

You might have a great relationship with a certain bank or lender, but you should still research different options to ensure you're getting the best home loan for you.

Mistake #2: Only considering the interest rate

Many first home buyers focus solely on the interest rate. However, the long-term cost of your mortgage is dictated by many factors, and going for the lowest rate doesn't guarantee you the cheapest home loan.

You might also need additional features from your home loan such as a redraw facility, so it pays to weigh up the benefits of a higher interest rate with getting the features you need.

Mistake #3: Not being honest about debts

You might think that by failing to mention those few additional credit cards you have, you're in the clear. However, if you over commit it could leave you in danger of defaulting down the track as the debts mount up and you struggle to repay.

Not disclosing all your debts - whether intentionally or unintentionally - could result in loan rejection. Don't hope for the best - be open and honest with your lender. 

Mistake #4: Making multiple loan applications

Another thing you should be careful of when applying for a mortgage is making multiple applications. Do your research before your apply. Many credit applications in a short space of time can impact your credit score as it could look like you are in credit stress. The more applications you make, the worse it looks to lenders. Shop around for the best home loan you can find, and apply for that one.

Mistake #5: Not checking your credit report

Stay on top of your credit health by requesting your free credit report every year - https://t.co/Lq61eli5zY

— MoneySmartTeam (@MoneySmartTeam) September 25, 2017

Your credit report is an indication of your credit worthiness, so it's important to check your credit report prior to applying for a mortgage so you know where you stand. Lenders look at your credit report, in conjunction with their own lending criteria, to gauge how reliable a candidate you are to receive a home loan. If you've got bad credit history, they could reject your application.

Get a copy of your free Equifax credit report. Check it thoroughly for any incorrect listings, and it isn't up to scratch, work on improving it before applying for a mortgage.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.