What are some of the criterias the bank looks at when I apply for a loan. I know there are quite a few before the bank will consider lending to a person but I want to try and find out more about what it is the bank does require before stamping a loan APPROVED!
I know servicebility is quite important – the ability to pay the loan periodically but is it right to assume that roughly the household can afford repayments of 33% of their net pay not taking into account other debts? Is this a good rule?
Another is savings. For some reason a bank likes to see some savings in the bank account and I have no idea why?
Can someone shed some light on this please.
Rory.
Hi Rory
From my understanding Banks thesedays will take into account:
1) Your wages and type/duration of employment (Generally full-tme employment is accepted. Part-time/casual or self-employed people will often have great difficulty obtaining a bank loan, if at all, as they are considered more high risk)
2) Your credit card limit (regardless of whether or not you have any monies outstanding on your card, they will add the limit amount to your outgoings – therefore advisable to shut down your credit card facility prior to applying for a loan)
3) Your savings (they want to see a pattern of savings and thus your ability to commit to paying back a loan. Banks want to see that you've saved for the deposit and not just been handed one from your parents)
4) How many times you have applied for a loan (ie; the more times you have applied, the more you are seen as a risk and the less likely you are to get approval)
5) Your ability to pay bills on time. They will run a Credit Report on you to ascertain this information. Obviously if there is repeated lateness (or non-payment) for instance in paying your phone bill, electricity/gas etc….this info will be noted. You can actually obtain a copy of your Credit Report through Veda Advantage.
There may be other criteria that someone else may know about, but hopefully this should give you a basic understanding of the requirements.
Regards, Tamara
Banks take into account a number of things before they will approve the loan. Obviously the stronger the application the more chance you have of being approved as it helps de-risk and make it more attractive to the lender.
Stable employment history, low consumer debt, clean credit file, decent assets position, high servicing capability, it all helps.
Each lender has different policies and serviceability requirements so what might not work for one lender may work with another due to different niches they have. Then depending on the LVR and lender you might have to obtain separate approval from the Lenders Mortgage Insurer as well.
Cheers
Tom
LVR, serviceability, employment history, amount of debt, security type and credit file are all big ones.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
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Dependants (eg children)
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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What happens then in a situation where I have good LVR, employment history, clean credit, servicability and little debt but have savings less than $20K and want to buy a home with a deposit of $80K. Technically the bank could say I can service the loan but do not have funds to pay the deposit.
Can I get a loan from the bank and apply a second mortgage carry back if the owner is willing? I only ask because we rent and want to purchase and have all the boxes ticked for being a good applicant for a loan but I don't want to use our savings for a deposit if I don't have to?
Rory.
Easy answer is to grab a good banker or broker and determine what is required and possible today if not 'tomorrow'. At a very basic level, the lender looks at 2 things – they are deposit and servicing. There are a whole bunch of other variables. Now it sounds like those variables may not be an issue nor is the servicing however the deposit may be an issue.
Which state are you in and is this your first home purchase?
TheFinanceShop | Elite Property Finance
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I'm in WA and it is not my first purchase. What if I show the bank I have savings but would rather not use them and ask the seller for a second mortgage carry back. Could I do this? Would the bank be ok with something like this?
did you live in it because you may be able to still claim the FHOG which would make a world of difference.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
I have previously bought two investment properties.
Simply use a lender that allows 2nd mortgage carry back.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for your comment Richard…Will do.
Thank you to all above.
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