It is no secret that Aussie homebuyers are having a lot of trouble getting home loans approved at the moment.
Pressure from the Australian Prudential Regulation Authority, along with a general atmosphere of caution from lenders amid the banking royal commission have been the main drivers to a tighter lending environment – which is impacting the Central Coast property market.
Local bank manager Belinder Skepper from Bank of Queensland Erina said that it has been a really tough time for her branch.
“I’ve had arguments with credit many times – the last six months have been really hard,” she said
“We’ve still got business coming in the door but it’s taking us weeks to get things approved that would usually only take a couple of days,” she said.
Ms Skepper said that while it is certainly harder to get a loan at the moment, it is still possible – you just need to be organised. Here are six ways for wannabe homebuyers to improve their chances at receiving a loan.
1. Allow some time
Ms Skepper said that it was wise to make sure that you can get your loan approved before you start looking, and start looking at your spending habits.
“Government have set new rules about declaration of expenses – everything is being assessed from clothing to childcare to medical, so you want to be organised with cutting back on expenses in the three months leading up to a loan application too,” she said.
“I’ve heard some crazy stories about banks going into statements with a fine tooth comb – apparently with one bank, if you have a third pet, it’s counted as a dependent.”
Certain transactions that are a big no-no include Sportsbet, Dan Murphys and Lotto.
“If credit assessors see this appearing frequently on a statement, they might highlight it as a person having a potential gambling or alcohol problem.”
Keep a close eye on what you are spending – it may come back to bite you.
2. Watch your credit card limits
“The biggest thing I’m having issues with is when people have huge credit card limits – I’d suggest that if you’re looking for a house, you need to decrease your limit if possible,” Ms Skepper said.
“You can do this online for a lot of cards – reduce or close down altogether. If people can just keep it to one or two credit cards, with a reasonable limit, the chances of getting approved are much higher.”
Bad habits can ruin a loan application.
3. Pay your debts on time
“Late payments are also a big problem when it come to a loan applications,” Ms Skepper said.
“Almost 80 percent of people that I see have missed a credit card payment or have paid late. It’s silly – most of them have the money in their account but they just forget to pay or don’t get around to it. Then what happens is a loan that may have been automatically approved will need to be assessed by credit, and if someone doesn’t have money in a savings account to prove that they could have paid the bill, then they will potentially get rejected, because credit will see it that if they can’t pay a credit card bill, they won’t be able to pay a home loan.
4. Start saving
“As part of the new stricter lending changes, banks now needs people to prove that they have the affordability to make that loan payment,” Ms Skepper said.
“You need to show that you’ve been saving the weekly equivalent to the value of your loan repayment, or paying rent plus putting savings aside to the equivalent of a repayment amount.
“If you’re paying rent of say $450 a week and your loan repayment is going to be $650 a week, you need to be putting $200 a week into a savings account for three months prior to applying for a loan to show that you can afford to make repayments. It’s all to do with responsible lending – the government want to make sure that the banks are checking that people can afford to pay their loans.”
It’s a no-brainer – save those dollar. AAP Image: Joel Carrett.
5. Stable employment
“If you’re moving from one job to another, it’s OK if you’re going into a better job that pays more but if you’re going to casual jobs here and there, you will struggle to get approval,” Ms Skepper said.
“If you’re looking at buying, make sure you are employed in a permanent position in the three months leading up the application.”
6. Older buyers need to load up their super
“Another new thing that is being checked is loan term vs retirement age – so if you’re 50, they now won’t let you borrow on a 30 year term, unless you can prove that you have plenty of other assets and super, so that you can afford to pay off that loan when you retire,” Ms Skepper said.
“So you need to give a reason or explanation of how you plan to pay off the loan in retirement. There are so many people over 55 having problems at the moment. The thing I’d suggest that might help is if people are boosting up their super to prove that they have the money there. They can do this in the 3 months period in the lead up to applying for a home loan.”
Sourced from: realestate.com.au
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