HOW LENDERS ASSESS YOUR LOAN APPLICATION

Part of lenders decision making in their assessment of an application is they will generally assess you against five qualities.
1. Your ability to repay the loanThe lender will look at your employment history and income to evaluate whether you have enough cash coming in reliably to pay the loan over time and look at your monthly living expenses budget.
2. How much cash you have up frontThis is to assess your ability to put down a percentage of the value of the property being purchased up front is standard. However, the percentages do vary as some lenders may approve a five percent deposit e.g. $400,000 purchase @ 5% deposit = $20,000 = $380,000 loan amount (plus LMI, stamp duty and costs).
3. The property appraisal priceAs the property is used as security on a home loan it is hence used as collateral if you are unable to repay the loan so the lender will value the property prior to approving a home loan. Based on the valuation report, the lender will decide whether the property is worth the loan being approved.
4. Your financial historyYour credit rating and history of any defaults, number of enquiries, and expenses and debts will help the lender assess your character as a borrower and whether you are worth the risk. How you conduct your everyday and savings account/s and credit cards.
5. Market conditionsEconomic circumstances in the market can influence what interest rate you have access to and can also influence the repayment schedule.
AS MORTGAGE BROKERS we can shop around for you to match the right product to your circumstances and requirements and guide you through the process and negotiate the lowest rate on your behalf, which is why half of borrowers today turn to finance brokers when it comes to finding a home loan.

WHY DO MORTGAGE BROKERS ASK FOR SO MUCH DOCUMENTATION?

No one likes paperwork; however, providing your mortgage broker with the right documentation will save you time and money. What information will your broker ask you to provide?
When you ask to enlist the services of a broker, they will probably ask you for the following documentation: ● Identification, including photo ID such as driver licence ● Income verification documentation such as recent payslips and/or tax returns ● Current passport, if you are applying for a government funded first home owner grant
Depending on the lender or bank you would like your broker to apply to for your loan, you may also be asked to provide: ● A recent PAYG summary ● A notice of assessment from the Australian Taxation Office● Tax returns and financials● Proof of your contribution toward the transaction, such as savings or deposit statements● Purchase contracts for a home loan, including building contracts, or plans if building
Why is this information important? While it may seem that you are climbing the Mount Everest of paperwork, a broker will ask for all of this to ensure they are protecting you and that they get the best possible deal. Gathering various forms of documentation allows brokers to verify your information pior to supplying to the lender and can provide the lender with a current picture of your financial situation and requirements and explain any anomalies if required.
This is also the process by which brokers can match a client with a loan that helps clients to achieve property goals, whether it is buying a home to live in, one to renovate and sell, or a long-term investment and matches their financial position. Brokers do not want to put clients in a loan that is not suitable for them.
Will a bank ask for the same documentation? If you apply for a loan with a bank that you do not currently have an account with, they will require much of the same information as a broker would. Although borrowers may be able to avoid the paperwork by applying for a loan with their current bank (which will already have a lot of information on file), this means being constrained by the products that bank offers and risking missing out on a better deal.
Saving you time and money As the broker has access to many banks and lenders across Australia and with lending policies and pricing varying across the lending market, why waste time going direct to bank to bank when a broker can compare a variaty of banks and lenders for you. And, if a client is not yet in a position to obtain a loan or has a credit issue on their file, such as a default, having a broker on-side can be invaluable.
In a nutshell, a broker will shop around to get the best possible deal for you, their client.