Due to the current economic climate, it’s no surprise that lenders are cracking down on home loan applications.
Applications that used to be approved in a few days , are now being put under the microscope for much longer periods.
To give yourself the best chance of having your loan approved, here’s five things you want to avoid.
1. No proof of genuine savings
Lenders use the term ‘genuine savings’ to describe funds you’ve saved over a period of time.
Basically, if you can’t prove to them that you can knuckle down and save for a home loan, they’re going to have a hard time believing that you can pay one off.
Here are a few ways you can prove ‘genuine savings’.
– Regular deposits into a savings account over 6 months.
– Term deposit savings accounts held for at least 3 months.
– Shares or managed funds held for at least 3 months.
– Rental history for the past 6 months.
– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (ie. not borrowed from somewhere else).
2. You spend money like it’s going out of fashion
Lenders not only want to see you save money. They want to see you can exercise discipline when it comes to your spending habits.
Lenders are increasing the time they spend trawling through your accounts, and will query any big-ticket items that seem out of the ordinary.
This might include ATM withdrawals at a casino, or a large purchase at a baby store when your application says you don’t have any children.
After-pay payments are also attracting attention from the lenders. Whilst you can find out more about After-pay here, we’d suggest you carefully reconsider using this payment method in the lead up to applying for a home loan application. Some lenders are making moves towards insisting it be considered an additional liability, which can affect your borrowing capacity.
3. Your credit history isn’t so great
Since Comprehensive Credit Reporting was introduced in July, lenders have been sharing a lot more of your credit history.
You can get a free credit report once a year from one of three national credit reporting bodies, which are listed on this government website.
If you find errors in your report, you can get them corrected. You can also take steps to improve a ‘poor’ rating by clocking up a period of consistency and reliability.
4. You don’t have enough saved
Lenders like to see that you’ve saved a deposit (generally a minimum 10%, ideally 20%) before applying for a home loan.
But all too often borrowers forget to include the additional costs they’ll need to cover like stamp duty, legal fees and moving costs.
5. You’re newly employed or your employment situation isn’t secure
Even if you tick all of the boxes above, lenders may also reject your loan application because you haven’t been in your job long enough.
Some lenders are becoming increasingly hesitant to approve loans to self-employed borrowers, without a track-record of steady and reliable income. That said, there are other lenders who are more flexible when it comes to self-employed workers – it all depends on the lender you speak with.
How we can help
Getting your loan approved is based on a few things.
First, you need to determine whether you satisfy the lending criteria set by the bank. And if you don’t meet the criteria right now, what steps can you take to ensure you are ready by the time you want to submit a loan application?
Second, you need to present the application to the lender in such a way that is has the best chances of being approved fast.
We can help you with both.
