Its always a good idea to find out how much mortgage loan you qualify for before making an offer on an home , banks typically base this on your income and your current monthly expenditure which includes living expenses and debt repayments.

Before the implementation of the National Credit Act (NCA) in June 2007 banks and other mortgage lenders typically would calculate a bond based on payments of not more that 30% of your gross monthly income. In the case of a joint purchase they would look at 30% of the combined gross incomes.

This methodology wasn’t overly concerned with your other debts as the banks were comfortable that they had a first claim on any income and the debt was secured by a mortgage over immovable property.

Since the introduction of the NCA , banks and other mortgage lenders need to evaluate the prospective borrower’s ability to repay the proposed bond. They need to take into account all of your expenses and all your other debts before determining how much disposable income you have to service a bond. The result of this is that since the NCA was introduced people typically are qualifying for much lower mortgage amounts resulting in fewer home loans being granted sine June 2007.

Here are a few tips to maximise the amount you qualify for:

• Prepare a budget and evaluate your monthly expenditure, eliminate all non-essential and luxury items
• Always try and pay your debts on time , if you have a problem making a particular payment speak to your creditors
• Make a list of all you debt and rank your debt by interest rate starting with the highest to the lowest. Pay off the highest cost debt first by making additional payments, once it is settled move on to the next highest and so on.
• Because of the stricter mortgage lending requirements it is important that you have a substantial deposit when applying for a bond. If you don’t have any savings available consider setting up a savings/investment plan after settling any debts.
• Find ways to increase your income , ask your boss for a raise , work overtime or consider getting a second job – the more you earn the more bond you will qualify for
• Find out whether your employer offers a housing subsidy to employees
• Before applying for a home loan check your credit score to make sure that there are no negative items recorded against your profile. You don’t want the bank/mortgage lender to be the one to tell you about it. If there are any adverse comments take the necessary steps to correct it.

Applying these simple principles will enable you to apply for a larger mortgage loan at a better interest rate as well. To see how much you currently qualify try our free mortgage affordability calculator.