Weekly wrap - Friday 18th September
Bank timelines, FHLDS & optimising your chances of approval.
Bank timelines are not getting shorter….
If you're signing contracts or work in real estate, you know by now that things are taking longer, two to three weeks with a lot of the banks. They’re handling massive volumes right now. They are doing their very best to keep on top of this, but the key is to be organised! Talk to a broker to get as much as possible out of the way. Especially since we are only 12 weeks away from Christmas, which is the busiest time of year for banks. To add to that, the state of Victoria is probably somewhat out of the market a little bit at the moment. Which means these volumes are coming from other areas in the country, so when Victoria comes back online in the next four to six weeks, things are really going to ramp up. So you do want to be in the best position before you approach the banks as it’s probably only going to get longer.
The First Home Loan Deposit Scheme: a huge success
All of these allocations are now exhausted. So if you have been able to reserve a spot for the First Home Loan Deposit Scheme, congratulations, but we strongly suggest that you jump on and find a property as soon as you can, because there is a huge line of people behind you waiting to use that allocation if it potentially is not used up.
Next financial year, another 10,000 spots are to come. We're looking forward to helping a number of clients; we've been successful in sort of reserving those spots to date. So watch this space.
Your broker can help optimise your chances of approval
Sometimes clients come to us after they've been to their bank directly and unfortunately have been declined. When you speak to your broker, we take the time to talk about common reasons why that might happen. One area we will discuss is expenses. Due to responsible lending, the banks are going to go through and verify your declared living expenses. They are going to perform a forensic accountant approach in some examples on your position. And when a declared living expense is maybe $2,200 a month, but they go through the accounts and it's closer to $6,800 a month, it raises questions.
Think Sports TAB, Uber Eats… If someone has got $150 a week down for a grocery bill, yet there is an account with $600 a month in Uber Eats over a period of time, then it's taken into consideration in the budget.
As an exemple, we did some mortgage documents with clients who had just been approved, which is fantastic, but they came to us after they had been declined from another bank for exactly that reason. They hadn't realised that Afterpay was considered a liability or an expense. And that was enough with a few other small things that were oversights for the bank to say no. Being thorough and explaining how Afterpay, ZipPay or Visas are viewed by the banks is important. It was no problem at all to get these clients approved, we just needed to make sure we were declaring and disclosing these things and that they were included in their budget.
Any type of credit card, personal loan and mortgages, are reported. Not only that you have the facility and how much is owing, but also the conduct on that facility over a two-year period. So if you haven't done it recently, I encourage you to jump on to the Equifax site, download the free copy of your credit file, and have a look at what is on there.
There might be an old Visa card that you haven't used for three years. If that doesn't get checked up front and it gets all the way through to an assessor, often their opinion on a file that might be just on edge is that it is an undisclosed debt and you should have known about it. All these things can be overcome with a conversation with your broker.
Let’s talk deposit
Money is very cheap. Interest rates are low. It is cheaper to buy than it is to rent in a lot of cases. Again, the great thing about working with a broker is having access to 60 banks. They all have different requirements, rules, policies, but if we talk in general, the deposit required for genuine savings is 5% of whatever the purchase price, saved over a period of time or in the account for no less than three months. We have access to banks that would accept a rental ledger in lieu of the fact that it maybe hasn't been there for the three months. So if you've shown good conduct in your rental, and that money might be a gift from mom and dad, then we can work with that.
A classic example is the majority of banks will like savings built up over three months. However, we have a couple that are very competitive in their offers at the moment that are saying money must have been there for a minimum of three months. Little things like that can catch you out if you're not quite all over what that looks like. And that's obviously our role to make sure we know those things and we are guiding you through them.
For us, it is all about getting you bank ready.