Understanding how mortgage brokers in Sydney evaluate you and your position is helpful when applying for a house loan. Whether it is a bank, an independent lender, or a financial institution, all applications are thoroughly reviewed before being granted or rejected.
While each lender's credit policies may change, all lenders use the same standards when evaluating loan applications. We will review each of them below:
Your Ability to Pay Back the Loan
To begin, lenders will conduct a character check—essentially a credit history—to establish your potential to repay your loan. They will consider the following:
- Your current and previous job and living arrangements
- Your previous loan history, including both approved and denied loans
- The length of time it took you to repay your loans, as well as any defaults or missed payments and any bad debts or judgments you may have had
- The total amount of credit inquiries you've made and when they occurred
These factors go towards determining your character, and they will use your credit file to assess them. Any previous credit card, mobile phone account, or personal loan applications are recorded in your credit file. Whenever you ask for credit, the credit assessor requests your credit file and uses it to determine whether you have a good or negative credit rating.
You must provide the lender with security over the loan. Because you will not have anything of sufficient value to hold as collateral if you purchase your first house, the lender will evaluate the property you are contemplating to determine its value and ensure it is worth the amount you want to borrow.
You would use your existing property portfolio as collateral if you were buying an investment property. The type of property you already own and its location determine variables considered in your loan application.
Your Capacity to Pay Back Your Loan
Lenders want to know if you can genuinely afford to repay your loan, which is why serviceability is so vital. Your income, the rental income you may earn from other investment properties, and lenders will scrutinise your assets and liabilities.
When determining your income, lenders will consider how much you make per month compared to how much you spend on living expenses, personal loans, and credit card debt. Applicants with a lower debt-to-income ratio (the ratio of debt to income expressed as a percentage) are more likely to be approved for a loan.
Finally, lenders will look at your capital—the amount you are putting down as a deposit. They will send your loan application to a mortgage insurer if you did not pass the required percentage, and you may be forced to pay mortgage insurance. Credit is generally easy to come by if you give the needed deposit.
Make Sure All Your Ducks Are in a Row!
You must meet lenders' requirements to submit the most refined application to a lender and increase your chances of a successful loan application. Contact a mortgage broker in Sydney immediately for assistance with your loan application or discuss your financing choices.
Wealthy is a trusted Australian mortgage company that offers the best home loans in Sydney. We can provide you with a range of mortgage options to match your specialised requirements. Call (02) 7900-3288 to start your pre-application!