01 April 2020 Blog From paying off your HECS debt to keeping a clean rental history, there are some surprising factors that can help you fast track your entry into the property market. When it comes to securing a loan and buying property, how you look on paper really matters. And when it comes to a home loan application, every little detail could affect your chances. Here are some things you might want to consider to help get you into your first home sooner. 1. Your HECS may affect your borrowing power HECS may be treated like any other debt in the eyes of your lender. Picture: Marie Bellando-Mitjans “Even though it’s government funded, low-interest and a great scheme, it does take away from your net pay. So HECS, like any other debt, may likely be factored into your borrowing capacity,” RAMS Franchise Principal and Home Loan Specialist, Matthew Clark, explains. So, if you weren’t too fussed about paying off your HECS any time soon, bear in mind ongoing HECS repayments will reduce your net weekly income, and therefore may affect your borrowing power. 2. Watch your spending We’ve all heard the rumours that avocado on toast is ruining your home loan prospects and this alone isn’t necessarily true, but excessive spending could be. “There is more scrutiny on peoples’ spending,” Clark confirms. “It doesn’t need to be silly – it’s not necessarily about how many cups of coffee people have in a day – but you need to be aware that the lenders will look at credit card statements and transaction statements and see where your money is being spent, and if there has been excessive spending it may need to be explained.” Picture: Porapak Apichodilok 3. ‘Buy now, pay later’ could affect your borrowing power Yes, your purchases on ‘buy now, pay later’ services such as Afterpay and Zip Pay can be looked at when applying for a loan. “People don’t realise these could actually be viewed as ‘debts’ – they are a liability and they need to be disclosed,” Clark says. “Like a credit card, these are accounts you could potentially close to improve your borrowing capacity.” 4. Rental history could affect your borrowing power While your genuine savings are perhaps a valuable indicator, if you happen to have suddenly come into money or you don’t have a great savings history, your lender may want to look at your rental history to assist in assessing your borrowing capacity. Picture: Devin Avery “Lenders are looking at behaviour that indicates the potential purchaser is able to manage their finances. If you haven’t had savings or you’ve been gifted some money, what the lender may look at then is your rental history,” Clark says. “They may assess if you’ve been able to maintain paying your rent on time or if you’ve missed payments, and it all adds to the character of the borrower. “At the end of the day, the structure for paying rent is not that dissimilar to paying off a mortgage. So, it’s a really good indicator for a lender.” 5. Your lender may be able to see into your past Comprehensive credit reporting was introduced in 2018 and allows lenders to see a more thorough picture of your credit history. In a lot of instances, this could be a positive as they can see your good financial attributes as well as your hiccups. However, this does mean they can often see a full two years into your (financial) past. So, you may want to start monitoring your spending early to keep your credit in tip-top shape. 6. Your credit card limit could affect your borrowing power, even unused “The lender takes into account the limit on your card,” Clark warns. “If you have a credit card with a $10,000 limit that you’ve never used or haven’t used in years, or even if you clear it every month, the lender will take into account the total limit on the card, not just the used portion.” Picture: Rupixen.com It may only affect you if you have a limit that is disproportionate to your income, even if you’ve never reached it. An option is to close any unused cards or reduce the limit to what you need. 7. Your first home may not be your dream home In fact, finding – and actually being able to buy – your forever home as a first home buyer may be unlikely. “I do encourage, especially first home buyers, to remember you’re not necessarily trying to buy the home you’ll be in forever,” Clark says. “This is only the first step in your home-buying process. Your circumstances may change one day, [the property] might turn out to be an investment, you might sell it to upgrade, but the hardest step is always the first. By looking at something more affordable, smaller or in a different area, you could use that to get into the market.” Another thing to consider is that you don’t have to live in your purchase. Unless you’ve taken advantage of your state’s first home buyer incentives – which usually require you to live in the property for at least six months – Clark reminds buyers they could get their foot in the market and still rent elsewhere. Originally published on realestate.com as “7 little known facts about getting a property” .