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What lenders want

Are you looking to take out a loan or refinance your mortgage soon? There is a wide range of competitive home loan deals available in today’s mortgage market but borrowers are being warned they may miss out on the offers if their loan approval is knocked back or delayed.

To ensure a smooth approval process, it is important to understand what lenders will be looking for when deciding to lend money to purchase property, renovate or for other things.

Mortgage Choice spokesperson Belinda Williamson said that lenders look for evidence that the borrower is a good saver or has built up equity, as well as having a healthy credit record, steady employment and manageable levels of debt.

“Keep in mind this applies to all types of borrowers, whether it is your first, fifth or fiftieth loan application, lenders will still assess your ability to borrow funds each and every time”, Ms Williamson said.

“To ensure a smooth approval process, potential borrowers should tick all the check boxes in the loan application.”

Ms Williamson suggests that having the help of a professional mortgage broker in the loan approval process may help.

“Working with you to complete the loan application, your mortgage broker will know the lender’s requirements, prompt you to supply the required documentation and submit the application on your behalf”, she said.

“The mortgage broker will then follow up the application and help guide the loan to settlement.”

To put you on a path to a smooth loan approval process, Mortgage Choice has compiled a basic five-step application checklist from which to start:

1. Steady employment and regular savings. Lenders want to see a steady employment history and for existing borrowers, they will want records of regular loan repayments or for new borrowers, they will want evidence of regular savings. Keep in mind some lenders consider rental payments as savings evidence, but there may be conditions attached, so do your research.

2. Clean credit file. Check whether you have multiple enquires or any defaults in your credit history, and if so, try to resolve them with the relevant credit provider before you apply for a home loan and if need be, provide an explanation to your lender. You can order a copy of your credit file from suppliers such as www.mycreditfile.com.au.

3. Satisfactory statements. Your recent bank statements should be free from any suspicious withdrawals or transfers such as movements of sizeable sums of money into or from your account/s. If this does occur, include an explanation for the transaction in your loan application.

4. Document your debt. Lenders will require you to list your current financial commitments, such as rent car and personal loans, credit and store cards, HELP debt, child maintenance, etc. Have your records on hand. Keep in mind the amount owed on your store and credit cards will not be the key factor for lenders; when assessing your ability to repay the loan, lenders will consider your overall credit limit.

5. Know your limits. For those looking to purchase property, there may be borrowing limitations based on your deposit amount and/or the property’s location, size and type. For these reasons, consider using a local mortgage broker to help you research the mortgage market before applying for a loan.