The top 6 things that hurt your chances of getting a home loan
Looking to get a loan in 2019? Well, the bad news is, it has NEVER been harder to get finance. The good news is, with HATCH in your corner, the scales are heavily tipped in your favour.
Our knowledge and experience saves you time and avoids the pitfalls facing consumers who go it alone. BUT for all our brilliance, YOU as the client play an important role in the process. What you do and don’t do has a big impact on the chances of getting a loan.
Here are the TOP 6 things that consumers do regularly that hurts their chances of getting a home loan:
1. Not disclosing debts/commitments
It is very hard to conceal debts these days. This is thanks to changes to credit reporting, and lenders requiring applicants to provide more documents than ever as part of a loan application. Yet consumers still regularly “forget” to tell us about debts or commitments.
The sorts of things we are talking about vary from car loans, personal loans or credit cards through to Afterpay and Foxtel. Make sure you tell us about all of these. We can then factor them into our assessment of your position and tell you how these debts/commitments affect your plans. If need be, you can then make the changes necessary, so you can get your loan approved.
Otherwise what happens is we submit an application that is not accurate, the lender picks up on the undisclosed debt and this creates problems. The loan assessment is held up, the lender scrutinises the application more heavily (as they are now looking for what else has not been disclosed) and now there is an increased chance that the lender will not approve the application.
2. A poor Credit Score
Most consumers have no idea what their credit score is, and for most consumers, their credit score will be fine.
Here are the indicators that you might have a poor credit score; You have defaulted on a loan or credit card OR you have an unpaid utility account (if you have lived with friends or in shared accommodation before this is quite common).
From Oct 2018 onwards, credit reports are also starting to capture details of your repayment history on all forms of credit, whether they be loans or credit cards. Any payment that is more than 14 days past the due date will adversely impact your credit score.
If you are looking for a loan, then obviously now is not a good time to start getting delinquent or tardy with your current obligations. And while you can’t change what has already happened, be sure to tell us if you know there is a “nasty” on your credit file (or fear there may be). Being fore-warned allows us to get on the front foot and increases our chances of getting loans approved for you.
3. Living expenses that are too high
2018 will mark the year that lenders actually started to really take notice of what consumers living expenses were. Why? Well, it is a guide to what funds they will have “leftover” to cover loan repayments. It makes sense right!
So the higher a borrower’s cost of living, the less they can borrow. Sometimes borrowers can clearly point to simple changes they can make to reduce this cost of living (cancelling Foxtel/Netflix, child care finishing with the start of school, cutting back somewhat on a lavish lifestyle).
As we help you work through this, what we need is your honesty about your current living expenses and a straightforward chat about what changes are possible (if a change is needed).
4. Bad account conduct
This is a lesser version of a poor credit score. It refers to late or bounced payments on loans and credit cards. Also going over the limit on credit cards or overdrawing on savings accounts. This type of conduct suggests an inability to manage your finances and that makes banks nervous (at very least).
Would you lend large amounts of money to someone who shows signs that they can’t manage their own money? Issues with this type of thing in the last 6 months will hurt your chances of getting a loan.
5. Focusing on getting the lowest rate
We all want a low rate, but often the lenders offering the lowest rate have the most stringent credit policy. So while the offer is a good one, many borrowers will not qualify for lending with that provider. In the search for a low rate, consumers also need to ask: Which lenders will lend to me given what they know about me?
No two lenders will have the same answer. That is where Hatch’s know-how comes to the fore.
6. Failure to understand the current environment
We regularly see borrowers rail against the banks and the amount of information they are asked to provide:
“I am a blue chip client, why do they need to see that document”, “Tell the bank that if they don’t approve my loan or give me a 1.5% pa interest rate I will take my business elsewhere”…
We don’t like asking for documents we don’t need and we don’t like the lenders doing this either. We are on our clients’ side. So if we ask for a document, there is usually a valid reason and we can all bitch about it but at the same time, we do need it! Lending is tight and hard to get. The process is often arduous as a result. We all need to understand that and do what needs to be done to get a loan approved.
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Need more information? Get in touch with us today!