Securing a home loan can often feel like navigating a maze, but with the right preparation and expert advice, it doesn’t have to be daunting. In this article, Bradd Bendall, National Head of Sales at BetterBond, shares invaluable insights on the dos and don’ts that will help homebuyers and investors boost their chances of getting a bond approved.

Key Highlights:

• Plan ahead: How starting with pre-approval can dramatically increase your chances of bond approval and speed up the process.
• The importance of a deposit: Why a larger deposit can improve your chances of approval and help you secure a lower interest rate.
• Why you should work with bond originators: The role of bond originators in streamlining the application process and ensuring you get the best possible deal.
• What to do if your bond is declined: Key advice on how to handle a decline and explore other opportunities for securing your loan.
• Common pitfalls to avoid: A checklist of mistakes that can derail your bond application, including credit mismanagement and insufficient documentation.

Bendall provides actionable tips on preparing your financial profile, including the significance of credit scores, managing debt, and ensuring all necessary documents are in order.

For more details or to discuss the article further, please feel free to get in touch.

Dos and don’ts that will help your bond application get the green light 

Before you start looking for your dream home or next investment, you need to make sure that you have everything in place to secure the bond that you need. 

Plan ahead and get pre-approveImprove your chances of getting a green light on your bond by first seeking pre-approval, says Bradd Bendall, BetterBond’s National Head of Sales. “The approval rate for clients who first get pre-approval with BetterBond is 95% of all applications submitted on their behalf.”

Pre-approval can be done online, at any time and at no cost. “The process is simple and the added benefit is that a buyer submits the same documents as they would for a bond application. This means that all the information is stored on an applicant's profile, and will be used for the bond application as well if done within three months of pre-approval.”

Pre-approval not only improves your chances of getting a bond, it also speeds up the application process.  

Furthermore, it gives you a good idea of what you can spend which means that you can make a firm offer to purchase (OTP) when you are ready to buy. This counts in your favour with the seller and makes it more likely that your OTP will be accepted, says Bendall.

The pre-approval certificate is valid for 90 days and while it is not a guarantee your bond application will be approved, it provides an indication of what you can afford and what banks will lend based on your income and expenses. 

Pay a deposit

Being able to pay a deposit on your home will also increase your chances of securing a bond, says Bendall. “The higher the deposit, the better your chance of securing a bond. It sends a message to the banks that you have a lower lending risk. This means that they are also more likely to offer a lower interest rate.” It also sends a strong message to the seller of a property that you are a serious buyer with the financial means to honour your OTP. 

Work with experts

“Working with a bond originator improves your chances of successfully applying for a bond,” adds Bendall. “A bond originator will manage the entire process, from pre-approval to writing loan motivations and submitting applications to multiple banks.” Reams of paperwork can be daunting. But by consulting a bond originator who manages the entire process, you remove this administrative hassle, explains Bendall.  Also, by approaching more than one bank, a bond originator can secure a more favourable interest rate. 

A bond originator will also advise on possible issues that could count against you when applying for a bond,” says Bendall. “Usually, these issues can be identified and dealt with before the application process even starts.” 

Furthermore, a bond originator can also help you apply for a First Home Finance subsidy, as long as you fit the criteria. 

What if your bond application is declined? 

“A no is not necessarily the end of the road,” says Bendall. “As a bond originator approaches more than one bank, a no from one bank need not mean that there is no chance of securing a bond elsewhere.” 

Bendall shares some of the common pitfalls that could delay or derail a bond application:

1. You don’t know your credit score. Having a good credit status will improve your chances of securing a bond, says Bendall. “Get a copy of your credit score from the credit bureau so that you have a good idea of your financial standing.” 
2. Manage your credit. While some credit is good – because it shows financial institutions that you can manage credit – make sure you don’t have any late or missed payments that could have an adverse effect on your credit rating.
3. Your credit card debt is too high. Try to avoid unnecessary credit if you are applying for a bond. Banks will look at your credit cards as collective debt. This applies to store accounts as well. 
4. You don’t have the right documents. Make sure you have all your personal and financial information ready. This includes recent bank statements, proof of income and a signed letter from an auditor confirming your personal income if you are self-employed. 
5. If you have applied for several accounts or loans in a short space of time before applying for a bond it could count against you, cautions Bendall. While it is good to know your credit score, too many queries from creditors could be a red flag for banks. 
6. Your monthly income is too low. Part of the consideration of your bond application includes a review of your monthly income and expenses. “Affordability is a fundamental aspect of applying for a bond. Make use of BetterBond’s online affordability calculator to work on whether you can afford a monthly bond repayment based on our monthly income.” The accepted rule of thumb is that your bond should be no more than 30% of monthly income. Bendall adds that the bond pre-approval certificate will include the highest purchase price you can afford, as well as your possible bond repayments based on various interest rate and deposit calculations. “This does not mean you need to apply for a bond based on this figure. Evaluate market conditions. If interest rates are in an upward cycle, rather apply for a smaller bond that you know you could afford if interest rates changed.”
7. You misrepresented some information on your bond application. Being untruthful when completing your bond application is fraud, says Bendall. Lying includes exaggerating your monthly income, leaving out information about your expenses and debt or lying about your employment record. “If you are still hoping for a bond, a bank can reject your application with immediate effect. This will have a detrimental effect on future applications with the bank. They may refuse to consider your application or they may charge a higher interest rate as you have been flagged as high risk.” If the bond has already been approved, a bank may cancel the home loan and institute criminal charges. 

Buying a home is a long-term investment that involves careful consideration and planning. By working with an expert who can guide you through the process and flag possible problems before they become obstacles on your homeownership journey, you have a far greater chance of success when applying for a bond, concludes Bendall.