What happens when you apply for a home loan

Question:  Where does my application go once it’s been submitted?

Paul Ryan: It’s a great question – a lot of borrowers are very intrigued about what happens to the application once it leaves their home or when the broker takes the information away.  It’s actually submitted to a dedicated credit team that validates all the information that you’ve presented.  They go through your employment, your income, all of the statements to make sure they are true and correct. That helps them make a value judgement about whether they are able to approve your loan.

Question: What’s a lender looking for?

Paul Ryan:  The three main things a lender is looking for when assessing your loan application is your employment, they want to validate that and they want to validate your income.  So they’ll look at things like pay slips, group certificates, they’ll even ring your employer to verify that you work there and your income.  Savings is a big thing.  Genuine savings are very important in today’s environment.  They want to see that you’ve saved money over a period of time whether that’s over 3, 6 or 9 months and that you’ve got that history of being able to save.  They will accept gifts from parents or inheritances but they like to see those funds have been kept in an account for a period of time, that you haven’t touched it, that you’re capable of leaving the money there and continue to save on the funds that have been gifted to you ..
Credit history is also a big one.  All lenders will do a credit reference check to make sure that your credit history is ok.  What a lot of people don’t realize is that every time they apply for finance there is a credit check done on their file.  So it’s really important that you don’t become a credit junkie because lenders don’t like seeing a lot of credit checks against your name and if there is a lot it makes them a bit risk adverse and you’d rather not have that used against you so it’s important you have a good credit history.

Question:  How can I check my own credit rating history?

Paul Ryan:  You can check your own credit rating history on line through a business called Veda Advantage, it’s a great idea because it’s going to save a lot of drama in terms of if there’s any nasty surprises there – you can jump on line and if it’s not urgent it will take about  10 days and it won’t cost anything but if you need it in 2 – 3 days it might cost $30 or $40. 

Question:  How much do I need for a deposit?

It’s hard these days to get the 95% or 97% lending ratios, years ago you could borrow 100% without any real genuine savings but you really need now about 3 – 5% genuine savings to be sitting in that account so borrowing about 95% - some will stretch it out to 97% but the rule of thumb is 95% so you need 5% deposit to be able to buy your own property.

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