Let’s talk about the bad financial habits that we as mortgage brokers come across from applicants wanting a loan. Here are 8 things you should not be doing when applying for a loan in 2022, avoid these so you can help your broker achieve a positive result for your application.
1. Betting: Do not have any gambling habits evident on your statements: This is a little controversial because I understand that people do like to ‘have a punt’ however the way this is potentially viewed by a lender can be based on habits VS income. E.g., I have seen an applicant with a $1,200 a month ‘habit’ on a 60k annual income. That is not going to fly as you are spending half a potential mortgage payment on gambling per month with no evidence that it can be stopped when needed. This includes online sports betting as well.
2. Adverse consumer behaviour: If you are ordering Uber Eats 5 times a week and blowing money on clothes every month etc and living pay cheque to pay cheque but you are hoping on a deposit from mum and dad, your spending habits will come into question. Just remember that just because the bank will take your parent’s as guarantors, does not mean that they will not scrutinise your spending patterns/behaviour and if they don’t like what they see, your loan will be rejected.
3. Undisclosed Debts: Tell your broker everything, the good, the bad and the indifferent. Do you have a HECS debt? Do you have BNPL accounts, tell us every credit card you have and what you owe. Have you missed payments? There is no hiding any of this in 2022. Run an Equifax report on yourself and you can see what the banks will have access to.
4. Do not sign a property contract: This is a big one and what I see as a massive own goal, do not assume that just because you earn good money that you will be a good candidate for a loan. There are multiple things that are assessed (including all of the above). Do not sign a property contract (especially under auction conditions where you have put down a sizeable deposit), you are basically risking this money until your approval comes through. You are also on a time restriction as you need an approval by a certain number of days (5-7 usually). I have seen people royally screw themselves over in these situations.
5. Adverse payment history: Once again it comes back to bad financial habits. Make sure that any credit such as personal/car loans, credit cards and Buy Now Pay later accounts (e.g Afterpay, Sezzle, Zip Money etc) are being paid on time. You will need to show a history of this (usually 3-6 months worth of statements). This is where you need to prove that you can handle making loan payments on time.
6. Do not Lie: This one is obvious but don’t lie to your broker or the lender. Just remember that they have seen/heard every lie possible and if you are caught lying about anything on your application (whether it be living expenses, existing debts, no of kids, age of kids etc) you can have your loan rejected. This can be evident in your next application also, as the next lender will have access to information showing that you applied for a loan with another lender and it was rejected. You can very easily get caught out and it will affect your future in adverse ways you never even thought about.
7. Do not change jobs in the middle of your application: There are rules to this one, however if you are getting a promotion within your existing company that’s fine. There are some lenders like NAB that have products that allow you to apply as long as you are staying in the same Industry however if you are not applying with that lender, you can kiss your application good bye (speak with your broker).
8. Do not apply for a loan with multiple lenders/brokers at the same time:
You would not engage multiple accountants or solicitors to work on the same case, brokers and lenders are no different. Best way to work out who the best broker/lender to work with is by doing your own research (look at google reviews for the brokers and look at product reviews for the lenders), low rates are not the only thing to consider.
If you have any questions around any of the above, reach out to us at firstname.lastname@example.org or go to www.sorenfinancial.com to run some calculations around your borrowing capacity based on your spending habits.