Finding it hard to obtain a home loan? Don’t take it personally. The banking regulators are placing tighter limits on how much banks and other financial institutions can lend. This is largely in an effort to exert some control over Australia’s infamously high housing costs and, more generally, to reduce our historically high level of household debt.

On top of that, many banks are concerned that any increase in interest rates will put more households under financial stress, leading to an increase in missed mortgage repayments.

That said, in a tighter home loan market there are still things you can do to put yourself ahead of the pack.

Be prepared

Your bank or lender will want to know all about your employment, income, assets, liabilities, credit history and more. They will want to see:

A steady income, preferably from stable employment. If you run your own business or are self-employed, the bank will want to look into your business finances too. If you’ve just ditched your day job to work on your internet start-up, or if you have other future planned absences from work, now may not be the ideal time to apply for a home loan.

A clean credit history. Your history can go back as far as seven years for serious credit infringements (non repayment of debts). Get a copy of your credit history to ensure it is correct and work on creating a good history well before you plan to borrow. This means making sure you pay all of your bills and loans on time

A track record of saving. Show the bank that you have the discipline to regularly save money. This will also help you build a bigger deposit – another plus that will make it easier for the bank to lend to you.

Low debts. If you have a big car loan it might be worth trading in the Ferrari for a second-hand Toyota. And try to pay off any other loans as quickly as possible. Also, be aware that lenders don’t take into account the actual amount owing on your credit cards but your total limit – i.e. the amount you would owe if you went crazy with your plastic to the maximum. Cancel any unnecessary cards and reduce the credit limits on others to the level that you genuinely need.

A budget. Following a budget demonstrates financial responsibility. Make sure it is realistic, so you can stick to it, but flexible enough to cope with the odd unexpected event.

Honesty. It’s important that you provide full and accurate information to your lender. Remember that they have access to a range of information sources, from your credit history to your payslips and bank statements.

Inside knowledge

A BankVic mobile banker can help you get your debt under control, work out a budget and establish a savings plan.

If you’re struggling to pull together your deposit, consider looking for a lender such as BankVic, which allows members to use a Family Guarantee to make up shortfall in deposit.