Record-low interest rates have boosted our borrowing capacity and made mortgage repayments cheaper than rent in some suburbs.

All while government schemes have made it easier to save a deposit or build a new home.

Consequently, first-home buyers drove the value of new home loans to a record monthly high in October – leaving others wondering whether they should get in now before prices rise even higher.

Determining whether now is a good time to buy a home ultimately boils down to your personal circumstances – and not changes in the market.

But if you’ve decided you’re ready to take the plunge, then here’s how to get a home loan during a pandemic.

1. Check your credit rating

Ask one of the credit bureaus in Australia – Equifax, Experian or CheckYourCredit (illion) – for a copy of your credit file.

This is free to do and will let you know if you have any black marks against your name.

If you do, check the information is up-to-date and accurate and contact the credit agency if it isn’t. You have a legal right to demand credit reporting agencies to correct any inaccurate information they hold on you.

If you have a poor credit rating, you can attempt to improve it by catching up on overdue payments. But be aware that some negative information stays on a credit report for up to seven years.

Learn more about credit scores here and here.

2. Get your documents in order

Lenders require proof of income and employment to ensure you can make your repayments. And they will also need to verify your identification.

This involves handing over pay slips, tax returns, your passport or another form of ID, the details of your current employer, and a history of your work experience.

Each lender requires a slightly different set of information. But getting this sorted early will allow you to get the most out of your first conversation with a broker or lender.

3. Work out your borrowing capacity

When you know you are serious about buying a home, talk to a lender or broker to find out how much you can borrow.

Many lenders have borrowing calculators that you can access online for free. 

But mortgage brokers who spoke to The New Daily said they provide ballpark figures rather than reliable amounts on which you can base a subsequent property search. 

“A broker will be able to look at your entire situation and use their experience and say … ‘this is how [the lender will assess these individual factors], and this is what we think’s a realistic borrowing capacity,” said Investors Choice Mortgages director Jane Slack-Smith.

“What a computer tells you when you do an online borrowing capacity may not actually be the case.”

Hero Broker founder Clint Howen added: “Find out what you need, get all your documents together, and have a chat [with a broker or lender] around what you think you can afford.”

4. Reduce spending

At the moment, many lenders are going through the bank statements of loan applicants line by line to determine whether they can meet their repayments.

Ms Slack-Smith says it’s therefore crucial that buyers cut back on discretionary spending in the lead-up to applying for a loan.

She advises printing a copy of your bank statement and reading it closely to determine how you are spending your money, as your actual expenses may differ from your perceived ones.

“Maybe you’ve got Netflix, and maybe you have a $25 pub meal every Friday lunch,” Ms Slack-Smith said.

“All these things come up as regular expenses that the banks will look at and say, ‘Well, although this is something you can turn off and turn on, you haven’t, this is a regular expense’.”

She recommended making small sacrifices, such as cancelling subscriptions and avoiding expensive dinners, for at least three months before applying for a loan.

5. Develop a compelling narrative

Mr Howen said buyers should also learn how to explain and present their income and employment history, as the banks will interrogate these during the application process.

“Just know that you sort of need to create a profile and story around yourself that you can easily package up and tell a bank,” he said.

This is where brokers can help, as they know how best to sell a buyer’s employment history, which could include gaps in employment or changing occupations, Mr Howen said.

His final bit of advice?

“Don’t go put a deposit down on a house before you’ve got approvals and know that you can afford it.”