Bank Re-assessing Approval In Principle

Hi All, I am in a bit of a situation with our unconditional approval and if you have any feedback it would be greatly appreciated!

We received a fully assessed approval in principle by MeBank about a monthly ago to borrow $710K.
The only conditions of the approval are as follows:

1. For a Property purchase: a copy of the executed contract of sale including all annexures and conditions within 120 days of the date of this letter
2. Security and valuation meets ME bank requirements
3. Confirmation that your financial position and employment details remain the same
4. Rental appraisals from a registered real estate agent that is less than 4 weeks old
5. Your application being acceptable to our mortgage insurer (if applicable)

Based on this, we went ahead and won a property at auction (887K) and now require borrowings of 710K. My broker has submitted the COS and all required documents back to MeBank, but they are now saying our DTI is too high.
Our DTI is about 6.6 - 6.7, and apparently MeBank requires additional credit approval for DTI's > 6.5

I am quite stressed as the property is due to settle is about 30 days and not sure if MeBank can provide an unconditional approval. I risk forfeiting 10% of the purchase price !

I am quite upset that they can go back on their AIP, since we relied on this for our purchasing budget.

At this stage we are awaiting to hear back from MeBank and will try and argue that the AIP has allowed us to borrow the amount of $710K. The back up plan is to start over with another lender, but I will need to do some research on which banks have higher DTI limit. My broker is concerned my interest rate % will be higher with another lender, but this is really the least of my concerns at the moment.

 

Perhaps best to start applying with another lender sooner rather than later and or reduce loan amount if you can

 

Was there a change in your financial situation for your DTI increase ?

Yes your best bet is to go to another with no DTI restrictions. Plenty around. Your objective now is not rate..is about who will actually give you the money.

 

Yes, I through the lending part was secure since we had the AIP. We purchased 19 Dec 21 with a 60 day settlement, and only heard back from MeBank yesterday so we now have 30 days left to go

 

Hi Tony, no there was been no changes to our situation and DTI from our original AIP approval

I feel bad but might have to change my broker to a more experienced one if things don't pan out. With 10% at stake, it's very stressful


Luckly I am in NSW so I think we have about 14 days extra from settlement date to seek finance

 

Agreed with this

 

It does sick that a banks pre approval is more of an indication than a guarantee. When your aiming to push the boundaries it can get risky.

Also sucks that your broker hadn't found a solution. Go to the and ask them to find a solution from any lender regardless of rate.

60 day settlement starting on 19th Dec is really more like 35 day settlement. I would have hoped your broker might have mentioned that most banks don't do much of Christmas and New Year.

Lastly,. Some practical, almost instant action that might solve your problems to discus with your broker

A - Have you any credit cards you can cancel?

B - Any chance you have a HECS debt. Would paying this down improve your situation at all.

C - Have you got a car or car loan? If you sold the car would that help.

None of them are great solutions. And potentially you sell a car,. Then need to buy another one after the house settles. It would be a waste of cash. But I'd rather loose 15k on a car than 80k on a house I missed out on.

 

That's a tough call.
I remember this happening mid to late 2000s to a few people I know.
And literally 2 weeks os less before settlement being asked to increase their deposit.
Some by as much 50k on resi IP out west, after being "approved".
And prices were much less.

 

Sorry to hear about your situation. That's tough. Like others have said above, try to improve your DTI with ME by providing more of a deposit or get rid of some liabilities or seek finance elsewhere with fast turn around. Depends on your situation, if I you are eligible, you are still very likely to meet settlement. PM me if you need assistance.

 

Thanks for the tips we have no credit cards, no hecs or car / personal loans. We brought all this to zero before the pre approval

There are a few things I gave my broker to help the situation.
1. Reduce loan amount by $20k and we will use our spare cash to top up the difference
2. Spouses pay increase letter effective Feb, approx 4.4k increase p.a before tax
3. My regular overtime pay of 3k p.a before tax. I do overtime every Jan and July as part of my job to wrap up yearly and half yearly accounts . But I only have 3 payslips of this as evidence (1.5 years working at the company )

My broker says Mebank should come back to us by the end of the week.

Had a chat with the conveyancor about my scenario. We can ask the vendor to extend settlement by 2 weeks and hope they agree. Other wise we will receive a notice to complete on settlement day, which gives us an additional 14 days.

Back up plan if MeBank declines the application is to go with another broker who specialises in highly leverage IP clients. And go back to the drawing board to see which lenders will meet my needs in terms of serviceability and DTI
We will have 41 days from the end of this week till the absolute deadline (14 days from the notice to complete)

 

Employer letter confirming overtime regularity etc may help, or not. Ask broker. The more you can assist to help tick boxes and the earlier, the better.

 

What does your broker have to say about your chances of being approved at ME Bank?
They should be able to get some indication from their BDM at ME Bank and then they can give you some certainty regarding the approval, if not then they should be suggesting you move to another lender asap, using someone like Pepper Money with no DTI limits, they can can prove deals within 48 hours, this could be a 'fall back' position although there are numerous other lenders that will allow a DTI up to 8 without much issue and have comparable rates to ME.
Also note, just because ME say they need higher approval to sign off on DTI's >6.5 doesn't mean they will decline the application.

 

As above, also look at FirstMac no DTI limits and pretty good looking at overtime. At 80% rates will be sharp.

I would chat with your broker and have a second application all ready to go, just in case.

ME turn around times are not great if deemed complex, out to 20+ days.

 

This is why I usually avoid auctions & would not do anything where I would be maxing out.

 

Its a known problem with them. That said many lenders have completely abdicated responsibility by not doing proper pre approvals at all. I had a similar situation where they updated their calculator a few times between aip and approval and didn't honour the original clacs but mine still scrapped in by a few $ a month.

I would strongly suggest submitting to another lender. Often your broker in this situation will not be keen to do so until they hit a dead end with ME but I would suggest it is the prudent thing to do.

 

I would start a parallel process with another lender asap.