Getting an utility for finance authorised may be daunting for first-timers and the skilled alike – the process is affected by big quantities of office work and requires lots of legwork and patience. We have a look at 7 not unusual mortgage utility mistakes and the way you may keep away from them while you apply for a loan.
1. Your credit file is littered with too many credit enquiries and notations.
As a borrower, you want the best deal. Problems may occur when you have too many marks on your credit file. Regardless of the lender, because they all have access to the same credit files, there will be alarm bells.
Tip: Don’t give approval to other lenders to access your credit file until you have decided on the preferred lender. Work with your Mortgage Broker to find the best home loan, taking into consideration your needs and circumstances, and then submit your application.
2. Your loan application is badly written.
An innocent error or an omission on your loan application when answering questions about your credit history can be seen as suspicious, possibly even fraudulent, by the lender.
Tip: Have your Mortgage Broker ask for the credit report for all parties to the loan before any application is submitted. Your broker can write a covering letter with explanations if required. Don’t underestimate the value of your Mortgage Broker in getting your application approved. Some brokers carry a lot of trust with lenders.
3. The Lender states you don’t have enough savings, too small a deposit or too low an income.
Deposit amounts and income requirements can vary from lender to lender. You also need more than the deposit when buying a home. There are conveyancing costs, mortgage insurance, stamp duty and possibly other legal costs or taxes.
Tip: Make sure you are confident that you have the required funds. Your Mortgage Broker can help you by giving you accurate costs that will be incurred with a home purchase.
If required, your broker can help find a lender that requires a smaller deposit, or one that pays your mortgage insurance, or a lender that requires no mortgage insurance.
4. The appraisal for the home you want to buy comes in less than the agreed purchase price.
This can be a major disappointment. Banks lend on Loan to Value Ratios (LVR’s). For example, if a property is valued at $360,000 but the asking price is $400,000. You have your 10% deposit, ($40,000) and you have money for the costs, about $8,000. The lender will only provide 90% of the $360,000. This scenario is going to leave you $30,000 short.
Tip: If a home appraises for less than its purchase price, there are a few potential outcomes:
Buyer and seller renegotiate a new, lower home sale price
Buyer increases down payment to meet new LTV and down payment minimums
Request an appraisal rebuttal (a service for which you will have to pay)
Buyer chooses neither option, and cancels home purchase contract
5. Your employment status has changed recently.
Mortgage lenders don’t seem to be too keen on people changing jobs if the unemployment ratio is a bit high. They think, ‘unstable’ and you might default on the loan. Most companies also have probation periods of 3 and 6 months and income assessment can’t be done until after probation is over.
Tip: There are lenders who look at employment and the ability to repay in different ways. Your Mortgage Broker can find these lenders. Failing that, your broker will look at other ways to have your loan approved.
6. Your savings history is bad or very irregular.
Lenders love seeing stable income and regular savings, at least 6 months of it. A saved deposit or at least proof that you will be able to meet monthly repayments will go a long way towards approval.
A lump sum appearance in your account, or if you are self-employed with seasonal bank movements are not as favourable with lenders.
Tip: Your Mortgage Broker will source your loan from lenders that allow unsaved deposits, gift deposits and parents help.
7. Your idea of a dream home is not shared by the lender.
Apart from the low appraisals spoken about earlier, some lenders have policies about certain properties such as an unacceptable postcode, or the property is considered to be rural.
Tip: For example, a residential mortgage loan cannot be used for working farms. Smaller acreages would not be viable as a working farm, therefore may be considered as ‘residential rural’ by a lender. In addition, there are some types of apartments that the lender might find unacceptable.
Your Mortgage Broker can help you find specialist ‘niche’ lenders that are happy to lend against these types of properties.
Using a Mortgage Broker is a free service to the borrower. So, using our services makes sense simply because we work to find a solution to your situation as well as being able to do the legwork involved in securing a loan. We can save you making any of the 7 common loan application mistakes listed above. Why go through all the hassles yourself when the whole deal can be done for you professionally, ethically and reasonably quickly?