Brokers - tips for best loan application

G'day brokers, experts and punters

Are there any good tips you care to share to get the best bang for buck out of a loan application.

There's the usual pay down credit cards and cut them up but what are other do's and don'ts that will help get the most out ones finances.

Eg.
Does having the same job for 10 years make a difference compared to 2 years?
Do extra super payments hurt calculations? Or can it benefit if you drop a tax bracket?
Kids! Should they NOT be registered at birth, how much will that help?
Employee share plans??
What are the ways "general spending" is calculated from lender to another? %or fixed amounts? How much do lenders rely on applicants figures

These are just some general ideas that I thought of.
My situation. married, 2 kids under 4, 1 car owned outright, 1 worker lots of penalty rates, 40hr week

 

Having the same job for a decent amount of time can help if you look high risk to a lender - ie, lots of credit hits and a few address and employment changes doesn't instill a lot of confidence in a lender.

Extra super payments don't hurt if they can be stopped at any time.

Not registering your kids birth does not make them cheap to run unfortunately - giving them up for adoption is the best option here. Hiring them out as child labour can also add to your cashflow.

In terms of your penalty rates, if you can prove they are regular and part of the job - ie for a nurse, that's usually fine, as long as you clearly document what they are so credit doesn't get confused.

 

Kids cost you "approx" 50-100k off your total amount you can get a loan for apparently. I have 3 so am already 150k behind! haha

 

Lenders don’t publish their credit scoring rules but most brokers who have submitted significant volumes will get a feel for these rules – what works and what doesn’t. Here are some things that do work and don’t work:

1. Occupation – There are certain occupations that are going to “score” well such as solicitors, judges, doctors, etc you get the drift. Other occupations are not going to score as well due to the nature of the employment, for example a cook may burn his hands and not be able to work for a period of time and same concept applies to blue collar workers. Dual income is a big plus – from the lenders’ perspective it gives the application stability in case one applicant is unemployed there is income from the second applicant.

2. Assets – lenders wants to see savings. If you have say $2,000 in savings then this is going to be a concern for the lender. Category 1 securities help as does actually listing all the assets such as superannuation, cars, etc. I see a lot of people forgetting to list their superannuation.

3. Liabilities – lenders want to see as little unsecured liabilities as possible. Secured liabilities are fine. Heaps of unsecured liabilities and/or maxed to the rim. So if you have a credit card limit of say $30,000 and your balance is $28,000 on the credit card then these will most likely result in a decline regardless of how strong your application is.

4. Personal information – address stability is a big one. Lenders don’t like to see that you have changed address 10 times for the last 12 months.

Heaps more to note but these are some of the big ones.

 

Lots of good responses above.

I'll add LVR.

Applying at 80% or below improves your chances heaps too. It keeps the lmi providers grubby hands out of it - and enables the lender to have more flexibility.

Cheers

Jamie

 

Taking it up a few steps, banks will want to see a few things for a loan application to be approved:

1. Serviceability - this is your income less expenses. Its mainly determined by your job. You need to be able to show that you can repay the loan.

2. Deposit (for a purchase) - how much skin are you going to have in the game.

Realistically if you have the deposit and the serviceability (and income can be used), and a clean credit history, than in most cases you will be fine to proceed.

These are the main two/three.

Going deeper into your circumstances assists mainly on cases where you need to sell the deal to the bank - usually policy exceptions, etc. This is what you may want to know more about. In these cases having stability, large asset bases, long employment histories, etc all assist.

In a lot of cases though, the bank won't prod too deeply into it and so long as you meet the basic requirements, switching houses/addresses/telecom providers, difference between 2-10 years, etc - doesn't make much of a difference.

Unfortunately from a 'bang for you buck' perspective, you don't really get a better deal for flying through credit scoring vs meeting the minimum benchmarks required (not failing!). They typically separate it completely. I.e pricing vs credit are in two different teams and pricing typically only works on LVR, loan amount and competitors.

 

Lenders look at 3 things

Credit
Income
Deposit

Credit scoring, or even if there is 'no scoring' then certain things help such as putting down all assets, including super. Put down phone numbers, email addresses, contact persons not living with you as this will make it easier to find you if you do a runner and it will therefore give you a higher credit score.

income - maximise it, timing of overtime, bonuses etc helps, get tax returns done for self employed side businesses etc. It all helps. Even dividends count with some lenders as do family tax payments.

Debts - minimise it. Lower credit cards, get rid of other personal debts, extend loan terms on existing loans (lowers repayments), change IO to PI (for some lenders) or PI to IO (for other lenders).

 

Nice little nugget there I've never heard of before. How much of a difference does putting down a few names make?

Also, I've heard that a $10k raise could equal and extra $80k in borrowing capacity, would that be correct?

 

I was told this recently by a credit officer for a certain bank - can't remember which one but I think it was Westpac. Putting names down helps a lot because if you disappear they have no way of finding you often - this will help. Make it up if you don't know anyone! (joke)

it all helps the credit score. Even useless assets such as different bank accounts with small amounts, household effects etc.

 

I've moved 5 times in 5 years (10km radios) but have worked for the same company for over 7 years.
Would this affect lending?

Also would these below be different or the same?

If you work in different roles for the same company
If you work in the same roles for different companies

 

It's a cumulative picture based on a whole range of things - any one thing in isolation is unlikely to be a dealbreaker (unless you don't have the deposit or income) however if you have a lot of these unattractive things in your picture it all adds up to be something the lenders don't want to deal with.

Also the exact parameters vary between lenders and their individual tolerance at that point in time.

 

The less you move the better as it appears you are more stable. Same with employer.

 

Yeah I just want to look as pretty as possible to keep things simple and have plenty of options

 

Different roles in the same company - one employer.
Same role, different company - different employer.

 

Just adding some context - you don't need a perfect credit score to get a home loan. You just need to avoid having a bad one. For example, if you think of it as a number scale, a 700 score may get through. Having a 1000 score doesn't get you anything better than having a 700 score.

So its almost thinking about it in reverse - what things will make my credit rating fall BELOW a certain, quite low, benchmark. A highly active file, high LVR, lots of instability, no relatives/contacts put in the application, etc - together these will likely lead to a rejection.

Also - there are ways to get around it but your lender choice does become limited - which you don't want.

Even if you do have 10 credit hits in a short time period, moved houses a lot, etc - there are lenders that don't credit score that won't mind as long as its explained AND you meet the serviceability, income and deposit requirements (and no black marks on credit).