Mortgage broker reveals the four biggest money mistakes Aussies make BEFORE they apply for a home loan

A mortgage broker has revealed the four financial behaviours aspiring homeowners need to avoid if they want to buy a property.

Director of the Finance Emporium, Jess Phillips, said lenders such as banks will pick up on financial red flags to assess whether a person will be able pay back their debt. 

Ms Phillips has helped dozens of people afford their dream home and pay off their loans quicker. 

She told Daily Mail Australia spending between just $500 to $600 a month on things such as gambling can reduce a person’s borrowing capacity by up to $80,000. 

‘If your goal is to buy a house, don’t take out any extra credit (and) be careful with your money,’ Ms Phillips said. 

‘Things like car loans have a massive impact on how much you can borrow.’

Stop making multiple cash withdrawals 

Ms Phillips urged Aussies looking to buy their first home to stop withdrawing cash from ATMs several times a month. She said mortgage lenders will view this behaviour as a regular expense. 

‘They will add it into what your monthly expenses would be, which can dramatically reduce how much you can borrow,’ Ms Phillips, from the Northern Territory, said. 

Ms Phillips also issued a major warning to those who make multiple cash withdrawals each day.

She said this could arouse suspicions that a person has spending impulses to fund things like a gambling addiction or betting on sporting matches. 

Don’t take out a car loan

Ms Phillips said the borrowing capacity could be reduced by up to a massive $150,000 if a person purchases a car loan before taking out a mortgage. 

‘I had a client in WA who cannot buy a house now because of his car loan until he pays that off,’ she said. 

Ms Phillips said these types of significant expenses can ‘kill a first home buyer’s dream’. 

‘You could have just got the $30,000 car rather than a $60,000 car,’ Ms Phillips said. 

She also urged people not to take out unsecured loans to fund the purchase of specific expenses such as weddings and holidays. 

Most lenders use what is known as a debt-to-income ratio (DTI) to calculate whether a customer can pay off their home loan. 

A DTI value of three is usually considered within the lender’s limit and a value of six and above is considered high risk, according to financial services regulator APRA. 

Avoid sending money overseas 

Ms Phillips said she has worked with dozens of clients who regularly send large amounts of money to friends and family overseas. 

She said lenders will view these customers unfavourably as this expense could be seen as a debt they are trying to pay off. 

‘They will ask a lot of questions about it, which could essentially mean that you get declined for the property you want to purchase because you can’t get enough borrowing,’ Ms Phillips said.  

Australians send a massive $20billion in assistance to friends and family overseas each year.

Ms Phillips advised people to not send money overseas at least three months before they take out a home loan or consider making one off payments instead. 

Ms Phillips said lenders will view customers who send money overseas in regular intervals unfavourably as this expense could be seen as a debt they are trying to pay off (stock image)

Use your savings wisely 

Ms Phillips says people shouldn’t be using their savings to fund the cost of their everyday expenses. 

Home loan lenders will assess a person’s income, expenses and debt to determine a borrower’s serviceability. 

Ms Phillips also urged people to stay on top of what they are spending their money on by going through their bank statements thoroughly.

‘[People] say to me they can’t save up for a deposit because they don’t have extra cash, but then when I see their bank statements, it’s horrendous,’ Ms Phillips said. 

‘They think they’re spending $2,000 a month, but they’re actually flooding out $4,000 a month.’

Ms Phillips said although she hates the word ‘budget’, it’s important for people to spend their money wisely by separating their needs from their wants.  

‘It’s really just understanding where your money is going and putting a plan in place where you know exactly how much you need for your bills, food and rent, she said.