Nailing your home loan application depends on four factors — your income, expenditure, assets, and debts. But lenders also want to see evidence of a savings and (good) credit history. Here’s what you can do to improve these.

1. Start saving. Make a plan.

In 2013, the BT Australian Financial Health Index found that a third of us pretty much live week to week, payday to payday.

It also found that 35% have a sound savings plan, with the remaining third falling into the ‘Could Do Better’ category. To have a good chance of getting a loan, you’ll want to be in the 35% who've sorted their savings.

But even if you get a substantial deposit together, lenders will still want proof you’re a regular saver.

Why? Because a sound savings record gives them confidence you’ll meet your home loan repayments on time.

If you’re savings have been a bit up and down, the good news is that banks look favourably on a record that might be just six months hard saving. So set up a designated ‘House’ account and get started today.

2. Sort out a budget

Having a budget—and sticking to it faithfully—is further proof to a lender that you’re financially responsible. A good ‘risk’.

We have several budgeting advice stories, but let's look briefly at three basic principles to start with.

Your budget should be realistic

It can’t be too harsh or you won’t stick to it. You need to take into account all your spending—all those little treats (as well as the necessities) that are easily forgotten.

Car repairs and maintenance, for instance, can be overlooked if you’ve had a good run over the past year or two.

Your budget should be ‘disciplined’

Just because it’s not the Budget from Hell, doesn’t mean you can enter ‘Shoes. $500 a month’ into your ‘Regular Expenses’ section.

You’re working towards a long—term goal and that requires discipline and some sacrifice.

Your budget should be flexible

This doesn’t contradict the previous point. But you need a bit of wriggle room in your budget for when things don’t go to plan.

If you have a setback, you can’t afford to let everything slide. It’s a great idea to keep tabs on spending with a financial management tool like NAB Spending.

3. Reduce your debts

Obviously, if you’ve got a hefty overdraft and loads of credit card debt, you’re not in a good spot.

To up you chances, you need to get your debt down. This might mean considering a debt consolidation loan so you only have one repayment to make each month.

Balance transfers, if used wisely, can also help reduce the amount of interest you’re paying.

Keep in mind that banks also take into account the credit limits on your cards, even if you’re not in debt at all. They’re interested in your total potential ‘risk’ exposure. So you might want to reduce your credit limits, or cut the number of cards you have.

More information

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

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