Your borrowing capacity is an important number when it comes to applying for a loan as it may determine your options when searching for your dream home. In the months leading up to your application, consider the below tips:
- Reduce your credit card limits
You may be guilty of having an unused credit card lying around or having one with an unnecessarily high limit. When assessing your borrowing capacity, lenders will consider any credit cards to be drawn to their full limit. For example, if you have an unused credit card with a $7,000 limit this will be deemed as debt against you.
2. Say goodbye to unnecessary expenses.
If you did a deep dive into your last three months of bank statements, what would you see? Too many Uber eats orders and an excessive amount of subscriptions? If so, it is time to cut back. Lenders want to ensure that you are capable of managing home loan repayments, therefore you need to demonstrate you have sufficient funds to do so and can manage your money well.
3. Pay off your debts
Debt doesn’t just include credit cards, so it is important to sit down and review all of your finances. Could you afford to pay the rest of your car loan before you apply for a home loan? The less debt you have, the more favourable your borrowing capacity and application will be.
You may be reading this blog and wondering what your current borrowing capacity is, that’s where our online calculators can help. Test it out here.