Improve your chances of a Loan Approval
29 April 2016 MO'R Mortgage Options
It’s not getting any easier to borrow money. The residential lending environment started to dramatically change late last year when lenders across the board raised interest rates on investment loans. But that was just the beginning.
Since then, lenders have increased the minimum living expenses for borrowers as well as increased servicing rates, making it harder for some borrowers to access the funds they require.
So, are lenders still lending?
Yes they are! However, you need to present your loan application in the right way to the right lender to maximise your chances of getting your loan approved quickly.
Here are a few things you can do to improve your chances of a lender saying “yes” to your application.
Consider the lender’s perspective and how you present on paper
Lenders are getting tighter with who they will and won’t lend money to, so you may need to work a little harder to prove yourself as a suitable candidate.
For first home buyers, this generally means being able to show you have saved your deposit over a period of time. You will also want to have a clear credit history and demonstrate you can properly manage any personal debt you have. You will also want to have a stable employment history showing you receive regular, consistent income.
For property investors, in addition to showing you have a good credit history and stable employment history; a lender may want to ensure you’re not too reliant on rental income.
Whilst it’s unlikely you’ll miss a repayment once you have your new mortgage, you do need a lender to agree to lend you the money in the first place! This means you need to consider how switching jobs or purchasing a new car may affect your chances of buying that home you’re working so hard for.
There’s *always* another way to achieve the same objective
There are many ways to cover a floor. Just because you can’t find the carpet you want, doesn’t mean you have to leave the concrete slab as it is. Having said that, concrete flooring seems to be making a bit of a comeback, so maybe this isn’t the greatest example…
The take home message is that there are different ways to structure finance for a property purchase. If things don’t work one way, just investigate your options a bit more thoroughly. And if you’re not sure how to do this, don’t worry… that’s why we’re here.
The more you can contribute the better
Generally the more cash you have, the stronger your borrowing position.
This is because loan applications where Lenders Mortgage Insurance (LMI) is involved are now being assessed with a higher level of scrutiny. Mortgage Insurance is generally involved when the Loan to Value Ratio (LVR) is higher than 80%.
Recently, we have seen mortgage insurers impose restrictions on securities in certain locations, as well as ask for additional documentation before approving an application.
Lenders Mortgage Insurance premiums are also increasing, meaning it’s not only tougher to qualify for a mortgage insured loan, but you may pay more for the privilege.
If you have more to contribute towards the purchase – by way of cash, equity loan or family guarantee – you may avoid having to get approval from a Mortgage Insurer altogether.
(Of course, there are circumstances when paying Lenders Mortgage Insurance is the right option for your situation. You can find read more about Lenders Mortgage Insurance here.)
We specialise in finding the right lender for the right job, and making sure that your chances of obtaining an approval are as high as they can be, so If you need help obtaining finance, from working out the best structure to selecting the right lender don’t hesitate to contact one of our friendly staff.