The Royal Commission into the Banking & Finance Industry has been widely reported over recent months and the industry certainly needs to clean up its act. With auction clearance rates taking a dive and a cooling property market, the media is having a field day!
It is fact that lending policy’s have become tighter and a more detailed approach to verify lending expenses is now required but it all isn’t doom and gloom. Until the full report from the Royal Commission is released, we really won’t know how we sit for the future, but we have been in the industry for a long time – 30 years and will be able to guide you through the next stage.
Already lenders are implementing a raft of changes to their home loan processes and increasing documentary requirements. Below are a few tips to navigate your way through the home loan process in the current environment.
Check your financial position
An increasing number of lenders now require you to provide your latest four months transaction and savings accounts so that they can paint a picture of your spending habits. It is not only important to ensure that you have an adequate deposit prior to applying for a home loan, but you also need to demonstrate responsible spending habits.
Plan ahead! If you are considering applying for a home loan, review your spending habits a few months prior. Cut back on discretionary spending like takeaway, nights out at the pub or on the punt and impulse buys (do you really need that new dress or suit!)
Create a budget and stick to it. Not only will you decrease your spending, but this will maximise your borrowing capacity. Lenders are scrutinising bank statements to ensure your declared living expenses match your bank statements. Understating your spending can be the difference between a yes or no on your loan application.
Clean up your credit
Before applying for your first home loan, make sure you are creditworthy in the eyes of a lender by obtaining a copy of your personal credit file. Your credit history will be a key factor that a lender will consider when deciding to process your loan application.
Make sure that current loan, telco and utility payments are up to date and paid on time. This is all now reported on your credit file. Making payments on time is now positively reported on your credit file. Conversely, late payments will have a negative impact on your credit score.
If you have a history of credit defaults, be prepared to explain honestly and up-front to the lender why those defaults occurred, how you remedied the situation and how you’ve taken steps to ensure the situation will not repeat itself.
Yes, we are in a tricky lending environment, but don’t be discouraged by negative media reports, we are having some great wins.
Whether you are considering purchasing a home or looking for a better rate compared to your existing lender, please contact Anthony Martin at on (02) 9954 5044 and he will be happy to assist you through the process.