6 Steps to ensure you are a “Gold Brick” in the bank’s eyes!

Obtaining finance is definitely not as easy as it used to be, and it can be a daunting process. As the Royal Commission into the Banking Industry continues, lenders are tightening their lending policies and asking more questions than before.

At Evolve Loans we are seeing first-time borrowers and people who haven’t borrowed in the past few years surprised and sometimes overwhelmed with the level of detail requested by the banks.

To give yourself the best chance of an approval there are a few points to consider to ensure you are a “Gold Brick” in the lender’s eyes.

1. Ensure your accounts are clean

Account conduct is hot topic with lenders on the lookout for customer behaviour patterns that make a good borrower.

Ensure your account isn’t overdrawn and there are no late fees on your loans or credit cards. Lenders believe a leopard doesn’t change its spots. If you’re not meeting your current commitments, they will be nervous about extending any more credit to you regardless of your income.

 

2. Check your credit history

Protect your credit file like a chest of gold! With life becoming busier, we often miss emails or reminders for payments.

Telephone or internet companies and power companies are among the worst culprits for acting quickly and selling off a bad debt. This usually happens as early as 90 days from the due date and can result in a default being listed on your credit file.

Once a default is on file it can be very hard to remove. This could be the difference between a high 3% interest rate and one around the 5% range. Check your file with Equifax Australia who handle the credit files or talk to your broker who should be able to obtain a copy.

 

3. Apply for as few loans and credit facilities as possible

Every time you apply for a loan it is recorded on your credit file as an inquiry. Lenders have a scoring system with one of the indicators being the number of inquiries you have made.

The more there are, the worse score you receive. If the score is low enough they may decline the application before you get to a credit officer and there is no way of turning that around.

Telephone accounts, credit cards, personal loans, Afterpay / Zippay etc and of course mortgages all count as an inquiry. As little as two or three inquiries in the last six months can hinder your ability to get a loan at your desired interest rate.

 

4. Show a good repayment history

A good repayment history involves paying your loans by the due date, but it can also extend to other commitments you honour like paying rent on time.

Having a good rental history shows lenders you can meet commitments and, in some cases, gets you around the need to have savings in your account for three months before proceeding.

 

5. BUDGET! Know what you spend and make improvements where possible

Budgeting is hard, we get it! But knowing what you spend and ensuring you do not spend more than you earn is Step 1 in getting your own home and securing your financial future.

Lenders are really drilling down on living expenses to ensure you can afford the loan you are going for. In the lead-up to applying for a loan, sit down and plan a budget for the household. If you don’t have one, a good mortgage broker should be able to give assist or there are plenty of resources online.

Trim the unnecessary expenses where you can and ensure you are going to be comfortable with the new commitment. This will not only show the lender you are capable of meeting the loan repayments, but I guarantee it will identify areas where you can improve and free up cash flow to pay down your loan faster!

 

6. Use a quality mortgage broker

Over 60% of Australians choose a mortgage broker to assist them with their finance, and this number is growing rapidly.

As brokers have access to over 40 lenders it makes sense to have a professional on your side who knows the market and can ensure not only that your application is approved, but you get the right product from the minefield of options out there.

A broker’s services cost you as the client ABSOLUTELY NOTHING. Brokers are paid by the lenders and this doesn’t affect your loan, interest rate or fees charged.

Lenders pay basically the same commission and brokers have access to lenders that aren’t available direct to borrowers.

Brokers also know the type of business that individual lenders have an appetite for. This helps you target the right lender, obtain your approval and get the property you are looking at.

If you’re not a mechanic, you wouldn’t try to fix your own car, so why battle it out with the banks direct when you can have a professional on your side who does the leg work for you?

Yes, it is harder than in the past to get a loan at the moment, however the lenders are still lending money to people who show they have the capacity to repay the debt.

A little bit of pre-planning with a quality mortgage broker will ensure you put your best foot forward and obtain the best loan for you, saving you thousands in interest and fees over the term of the loan.

You can learn more about Evolve Loans and our services here or contact us directly for further advice.