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

A mortgage adviser has revealed the four financial habits that aspiring homeowners should avoid when buying a property.

According to Jess Phillips, director of Finance Emporium, lenders such as banks recognise financial signals to assess whether someone can repay their debts.

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

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

“If you want to buy a house, don’t take out extra credit and be careful with your money,” Ms. Phillips said.

“Things like car loans have a huge impact on how much you can borrow.”

Stop making multiple withdrawals

Ms Phillips urged Australians looking to buy their first home to stop withdrawing money from ATMs multiple times a month, saying mortgage lenders would see this behaviour as a regular expense.

“They add it to your monthly outgoings, which can significantly reduce the amount you can borrow,” said Ms Phillips, from the Northern Territory.

Ms Phillips also issued an important warning to people who withdraw money multiple times a day.

According to her, this could raise the suspicion that someone wants to spend money to finance a gambling addiction, for example, or to bet on sports events.

Don’t take out a car loan

Ms Phillips said borrowing capacity could be reduced by as much as $150,000 if someone takes out a car loan before taking out a mortgage.

“I had a client in Western Australia who couldn’t buy a house because of his car loan until he paid it off,” she said.

Ms Phillips said such significant outlays could “crush a first home buyer’s dream”.

“You could have just bought a $30,000 car instead of a $60,000 car,” Phillips said.

She also urged people not to take out unsecured loans to finance specific expenses, such as weddings and vacations.

Most lenders use what is known as the debt-to-income ratio (DTI) to calculate whether a customer can repay their mortgage.

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

Avoid sending money abroad

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

She said lenders will look negatively on these customers because these charges can be seen as a debt they are trying to pay off.

“They ask a lot of questions about it, which can actually result in your application for the property you want to buy being rejected because you can’t borrow enough,” Ms Phillips said.

Australians send a staggering $20 billion in aid to friends and family overseas every year.

Ms Phillips advised people not to send money abroad for at least three months before taking out a mortgage or to make lump sum payments instead.

Ms Phillips said lenders will look negatively on customers who regularly send money abroad as these charges can be seen as a debt they are trying to pay off (stock image)

Use your savings wisely

Ms Phillips says people should not use their savings to finance their day-to-day expenses.

Mortgage lenders assess an individual’s income, expenses, and debts to determine whether the borrower is creditworthy.

Ms Phillips also urged people to be careful about what they spend their money on by checking their bank statements thoroughly.

‘[People] “They tell me they can’t put money aside for a down payment because they don’t have any extra money, but then I see their bank statements and it’s horrible,” Ms Phillips said.

“They think they’re spending $2,000 a month, but in reality they’re spending $4,000 a month.”

Ms Phillips said that while she hates the word ‘budget’, it is important for people to spend their money wisely by distinguishing between what they need and what they want.

“It’s really just about understanding where your money is going and making a plan where you know exactly how much money you need for your bills, food and rent,” she said.