Banks reassessing pre-approvals.

This Will have a large impact.

Banks are getting worried.

So we currently have a preapproval with our bank ( 6 months validity we are 3 Moths in)

I got a call from our lending specialist at the bank and they said the Pre-approval needs to be reassessed .

And I quote
"As we discussed, a change in our income verification policy this week means we will require some additional information to support the reassessment of your pre-approval. This includes the BAS statements for Q1.Q2,Q3 for FY 2019/2020


This might have a negative impact as many with preapprovals will now to qualify for the loan and will beout of the market.

 

Technically pre-approvals have always only been valid for 90 days, but with the option to extend for another 90 days with some additional verification that your circumstances haven't changed.

Odds are you were always going to get that call, but they've increased their scrutiny a little more than they might have done otherwise.

You're right though. Pre-approvals have always had some wording to the effect of they reserve the right to review at any time and change their mind. That could be a problem for some people in the immediate future.

 

Yeah have to say that’s not even a stretch pre CV19. Add that to the mix with being self employed and it would be a given.

But whilst on the topic. @Peter_Tersteeg @Rolf Latham in the past some brokers on here use to be fairly anti pre-approvals. Surely in today’s world your advice to every client purchasing is if you don’t have STF finance clause then a pre-approval is mandatory?

 

My approach is that pre-approvals are there to give answers to questions in the grey area of lending policy. Today's market conditions have introduced some additional unknowns and that needs to be considered, but overall I don't think a lot has really changed in regards to if they're useful or a waste of effort.

For example I have a client who's an economist with the Victorian Treasury. Given she's been a few years in the role and holds a doctorate in economics, I'm fairly comfortable in her employment continuity right now. There's no conditions in the current market that really concern me, so a pre-approval isn't really going to tell us much.

However the same client wants to purchase within about $5k of what I think her maximum budget is and a significant portion of her savings are coming from family overseas. Nothing to do with CV-19, but these things would trigger me to get her the pre-approval in any market conditions.

The outcome was we lodged a pre-approval. She found and negotiated a great deal 2 days later, before the pre-approval was issued, but by that time I'd spoken with the assessor who'd indicated that he was comfortable with the things that were concerning me. The loan was ultimately approved.

 

Not anti-pre-approvals...just anti pointless preapprovals As Pete says, sometimes you need to do them so you can be sure of the deal.

But these days, banks are requesting employment info after formal approval, so there's always room for finance to get rejected, even once the property is unconditional.

 

I have bought close to a 10 properties through this institution. First call ever asking me for update Information mid way through pre approved period.
My approval was given for 6 months I have it in writing.

The call was specifically to let me know about the change in current environment.

This was made clear to me by lending specialists (She said it's specific to the current state of affairs)

@albanga I'm trying to explain she was on the phone all day Informing her clients that additional information is required if they want to proceed. She made this pretty clear this is Not normal for her.

@Jess Peletier we are looking at a site hence approval in place. I don't normally have approval in place unless we are looking.

Take care guys

 

I’m guessing as you have a relatively large number of properties and there is a real risk of rent not being paid from possibly 10’s of those properties that the bank is being prudent by reassessing things regularly. I imagine the banks are looking very carefully into any rental incomes that are part of income in a loan application.

As there are likely many opportunities coming in the near future why not just pull cash out of offsets to buy the development sites without having to talk to the bank. Once everything blows over then you will be in a good position to finance that tower or townhouse complex