The global pandemic has affected all of us in ways we couldn’t anticipate.
We speak with our network of mortgage brokers daily and they’re seeing firsthand that getting a loan is now more difficult and it’s more complicated.
With so many people facing job losses and an economy that’s slowing, the lenders are becoming more conservative. Their lending policies are becoming more cautious which means that fewer loans will be approved. These lenders are also changing the way they’re assessing loan applicants income.
Let’s take a look at the factors that lenders consider when assessing your home loan application:
While your industry and job security has always been a factor when getting a loan, the sectors hit hardest by this pandemic will find it even tougher to secure a loan. Industries like hospitality, tourism, events, aviation, entertainment and retail will be most affected by this.
If the nature of your work is casual or you’re on a contract, the lender assessing your application may not include this income in your “serviceability”. We’re also seeing income from bonuses, commissions and overtime being assessed differently.
The type of loan
The lender approaches your application differently depending on the type of loan you’re applying for: a home loan or an investment loan.
Each lender has a different “risk appetite”, which refers to their willingness to accept loans based on the applicants position. Each lender has a different stance on how much risk they want to take on and this will affect how much they are willing to lend you.
The lender’s strategy
Each lender will have a different strategy for new loans depending on if the new loan application comes from an existing client/borrower or a new borrower. It may be easier to get a loan with your existing lender than with a new lender.
Policies within lenders are changing constantly as they react to market conditions, so the likelihood of being accepted for a loan can change from one week to the next. Working with a broker increases your ability to get a loan as they can “shop around” and leverage their relationships to get you a good deal with the best lender they can.
Lenders are scrutinising the security of your job and financial position prior to approving loans, moreso now than ever, so you may be required to provide further documents or information to prove that you can service a loan if approved.
Each bank is approaching the pandemic with renewed caution to approving new loans. Their own policies are changing regularly and borrowers can expect to face more scrutiny when they apply for a loan.
Speak with a broker if you’re looking to get a home loan soon, and if you’d like a hand finding someone to use please get in touch with us via firstname.lastname@example.org or on 02 8387 7948