Once upon a time employment and stability used to be the key to a successful loan application – things like your employment history, having minimal unsecured debt, the strong ability to service a loan, a clear savings history and a deposit.
BY CHRIS ACRET
These things are all still important, however we’re seeing a definite trend toward the requirement by lenders for more and more detailed information.
Naturally, you want to put your best foot forward and ensure your loan application is as strong as possible. This includes:
• Having your loan application structured properly and presented professionally – this gives a good first impression.
• Being honest – you need to provide evidence for everything, as discrepancies will show up.
• Checking that your credit rating is good – paying your bills on time will help.
• If you’ve recently changed jobs, get a letter from your new employer confirming you’re no longer on probation.
• Keeping financial records up to date – simply completing your tax return on time can be helpful in securing the loan you’re after.
• Shopping around – income type is treated differently by nearly every lender. Almost every lender regards income derived from dividends, second jobs, child maintenance payments, company profits, bonuses, commissions, government benefits, annuities and rents differently – some may be excluded altogether.
More details please
In addition to this basic information, in the current environment in particular, lenders want to see a lot more evidence to support your loan application.
Credit scoring for example, despite having been around for a while, is becoming increasingly complex and relies upon every piece of customer data – so it has never been more important to complete every single section of the loan application form.
In some instances an applicant might lose points for seemingly simple things like not having the ‘nearest living relative in Australia’ field filled in – even though it’s not mandatory.
Likewise, while an applicant’s net asset position has always influenced the way banks lend money, this has also become increasingly important.
From the banks’ perspective, a borrower’s income to net assets ratio goes to the core of their character. The lenders’ view is that if you’re the sort of person who can convert your revenue into wealth – or assets – it demonstrates that you are the type of person who is likely to make your home loan repayments.
Equally, there are things lenders aren’t keen to see. For example, lenders don’t want to see too many credit enquiries, which can lower your credit score.
There have always been many factors considered in the assessment of a loan application.
In fact, lenders’ rules about how they assess loan applications are in a state of constant flux. However, the trend seems to indicate that the more information and supporting documentation you can provide, the better the chance of having your application approved.
Chris Acret is the managing director of Smartline Personal Mortgage Advisers, which is a multi award-winning franchise group that has built a reputation for advice and client care. Around 85 per cent of Smartline’s business comes from personal recommendation. Visit www.smartline.com.au