LOANS & PRE APPROVALS:
So theres a couple things when it comes to loans here in Australia and especially over the last 1-2 years as things have been changing alot in both the realsestate and property landscapes.
1. The game has changed– Lenders can opt out of a Pre Approval at any time, even if they are bank that has given it to start with- Assessments of their banking team can also decide to delay these for no reason as the are just “pre” Loan, not a “formal” Loan application. This can be seen by some banks as a bit of a waste of time, and In my experience have seen banks not even touch preapproval clients over those wanting straight formal approval as if also affects them too. – Making a decision on the client can also be declined by a bank at any time, if the client hasn’t provided enough information to the bank (insert the purpose of using a seasoned professional broker who knows which banks want what and had an excellent success history).- Coffee shop pre -approvals are exactly that – not worth the paper they are written on in most cases. This is because pre-approvals aren’t unconditional (meaning there are many more conditions this “pre approval” needs to provide before being acceptable. In this case, it’s best the broker check with each bank prior to application and check these requirements thoroughly and ensure the client has all of these, and just go straight for a formal approval, saving everyone time, energy and effort).- so what’s the solution? ill answer that later on…
2. LMI– If client is fully pre approved and meet the banks criteria, this also doesn’t mean that they meet the same criteria for the Mortgage Insurer, and again can be declined. This can be for any reason such as time in role, savings history, Lump sum deposits in their bank account looking suspiscious (lump sum being the equivalent of 1% of the purchase price of the property), left over discretionary income in the event of a disaster, and so on… and again be declined.- Banks and insurer are completely different and again, the broker is the pivotal person here that matches both, and check all criteria of each. This is why we pay brokers great fees, and the good ones are so sought after.
3. Reliable Pre Approval?- Credit score, credit files aren’t usually check in quick forms like TLC form, you’re right. However what is worse is if someone has previously applied to a bank, or phone company, or somewhere and been declined, they could again be declined by a bank, even with a pre-approval being given.- Pre Approvals are no promise and banks again can change their mind based on:- Type of property being purchased- Inability to verify valuations- Credit criteria not matching property prices- Algorithms of the bank which can something check their lending at worse case market scenario ie. 4-5% lending. If clients still make it in those scenarios (usually only very stringent banks) they may decline if the client cant repay in those cases too… So this part is important to use as “Property Experts” to ensure we have something ready to go at the exact same time we apply for formal approval to ensure we get approved 99% of the time.
What is great to do instead?
1. Have an amazing broker on board (which we do Dana) who knows all of these things. She also can see and check all criteria and match it client and ask for documents and verification ahead of time, knowing exactly what will be asked for. They aslo know the history of applications they’ve done in the past and usually gauge these things extremely accurately. 1% of the time, other documents can be asked for, but usually not if done in this way.
2. Asking clients not to take money out of their super during this period of time, banks check people’s super activity too, and again can decline.
3. Continue a Full Loan Form like what dana has provided, inclusive of all supporting documents + Adding in a current credit check for dana so she knows exactly what shes looking at. These can be done by the client through EQUIFAX and don’t make hits to their credit file as it may do asking a lender to look, and again could mean they get declined if too many enquiries have been made of recent.
4. Full analysis of all the above is what a bank does in their formal approval, and therefore as we have the ability to be responsible for this, we can certainly speed up the process amidst whatever else is going on in the market.
Author: Karly Reimers
Property Acquisitions & Development
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