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Essentials To Know

Applying for any loan tends to be a stressful experience for any individual. The following are some, but not all, thing you should be aware of.

Timing

If a loan application has a required approval date due to contacts (purchasing property) applicants MUST realise they need to move urgently to ensure their application can be prepared in time for lodgement, processing, approval and then preparation for settlement.

In the case of a property purchase, the MINIMUM time for finance approval should be 21 days, but preferred time is 28 days.

As a general rule, it can take the applicant a minimum of 7 days to be fully prepared with all supporting documents ready to finalise the loan application. Then it can take 3 days to prepare the lodgement and online preparedness of the dealing ion the lenders system.

Then the valuation is arranged which can take 3 working days before it is ready for the lender.

Then the lender may then take between 2 to 5 days to even pick up the file to start processing. At times, lenders have fallen behind and unable to pick up new deals for 10 or more days.

The majority of occasions when a loan approval is not ready in time the delay is due to the applicant took too long to prepare all supporting documents.

Accuracy and truthfulness.

It is imperative that applicants are always accurate and truthful with the information in any loan application.

Lenders do allocate staff resources as well as have computer systems capable of identifying false information and falsified supporting documents. Lenders assessment teams are specially trained to look for inaccuracies and they will not hesitate to question areas of an application that do not appear correct.

Incorrect, misleading or missing information and or questionable supporting documents will most likely result in the lender immediately declining the application without the opportunity for any appeal.

Lenders now days also allocate resources to checking vital information such as credit checks on past and current borrowings, verifying past addresses, phoning employers to verify employment and income, asset checks through searching of government registers for ownership of properties, vehicles etc.

Please note, lenders suspecting fraudulent details in any loan application will immediately pass the dealing to the local police for investigation without any further contact or notice to the applicant or mortgage broker of lender staff.

Supporting Documents

All lenders require supporting documents with any application that substantiate and support information contained in the loan application.

It is vital that applicants make the necessary supporting documents available ASAP so as not to delay the preparation of the loan application. Until all these supporting documents are supplied, the loan application cannot be lodged for assessment.

Generally, every time a lender requests additional supporting documents, the loan is suspended for 5 working days and the file will not be picked up again for assessment until this suspense period has passed.

Budgeting

Now days all loan application must include information on the applicant’s or business’ income and expenses.

Applicants or businesses are required to supply a budget of income and expenses to show the lender the new loan is serviceable. Legislation suggests these budgets must be prepared by the applicant or business and not by the mortgage broker nor the lender.

If you need assistance to prepare a budget check ASIC MoneySmart website.   

The Assessment Rate

This is the term used when lenders apply a higher rate to the loan being applied for when determining is the borrower can still afford the loan should and when interest rates increase.

For home loans, regardless of the rate applicable to the loan, even if the rate is say 3.90%, lenders will actually apply a rate of anywhere between 7.5% to 8.00% and then see if the borrower can still afford repayments.

If applying the Assessment rate shows the applicant could not afford the loan, then the loan will automatically be declined.

If you have questions, please contact us

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