Credit Rating is clear, however Credit was refused? Every lender has their own set of guidelines and criteria under which they are prepared to approve a loan facility. Many borrowers will approach a lender cold not knowing what that lender likes or dislikes, and becomes a gamble as to whether they are going to fit that lender's guidelines. Consequently, a credit refusal may follow, causing embarrassment and humiliation. Here at Finance Here, we pride ourselves in our understanding our lenders guidelines, and then being able to match borrowers to these lenders with the minimum of fuss. We enjoy a 98% + success in placing our clients with various lenders.
Credit Reporting Agency Report One of the first procedures that a lender will check is your credit history. They will invariably search your files held by their CRA (which is usually Baycorp Advantage). After they have obtained a copy of your report the financier will check for any credit infringements and should you have any, assess what they are, and how they could impact on their company's lending policy, and more importantly in their opinion how these infringements (if still unpaid particularly) could impact on your ability to service their loan facility. Remember, the financier can not access your personal credit file without your written permission. However, they do not need your consent to access your commercial file, although they will usually obtain your written consent to do so. The next area of Credit Assessment is to check your ability to meet the proposed repayment program without undue hardship, whilst still meeting your current commitments. Depending upon the loan type that you are seeking will depend upon the criteria that the lender will match to your application. Most lender's have their own calculations work sheet they use to calculate these figures. They are in most cases bound to guideline criteria laid down by the Uniform Consumer Credit Code (UCCC) in that it must allow a set minimum amount for living expenses, current commitments etc so that a borrower does not intentionally over commit themselves. Most financier's if you approach them direct will not divulge this information to the public at large. Many decline's are due to a borrower not knowing what formulae is being applied by various financiers. Type of Security being Offered The next item in an application to be assessed is the type of security being mortgaged. The type of security will be checked as to whether it is residential, Rural Residential, Commercial, Industrial, Rural etc. Should the security type be not within the guidelines of the financier, the application will be either declined, or the loan product varied to meet with the security type being used for the loan. The property will be checked to see if it meets the minimum guidelines. This information is usually obtained from the valuation report that is commissioned by the financier to verify and confirm their security position. For further details as to how we can help please click here. The loan amount is then assessed in conjunction with your serviceability to make sure it is within the loan product guidelines. Many financier's have minimum and maximum loan amounts. In many cases the minimum loan amount that can be borrowed is $50,000.00. This is usually because the costs of establishing a loan is substantial and it is not worth the financier's while to process a loan for a lesser amount. There are however, some financiers who will advance lesser amounts, and Finance Here can assist you in this area. Once the financier is satisfied that the application meets their requirements in terms of serviceability, creditworthiness the financier will call upon a formal valuation to confirm that the proposed property will meet security requirements. The financier will issue a set of formal instructions to a trusted valuation firm (commonly known as a Panel Valuer) to inspect and assess the property for it's condition, value compared to similar properties nearby, zoning confirmation, title particulars verification etc and give a considered opinion as to the likelihood of market trends, marketability under certain conditions and as to whether the valuer thinks the property is suitable for mortgage security. Part of the credit assessment process is to check how stable a prospective borrower is in their residential habits. Whilst this is not as crucial in a mortgage loan assessment as a Personal Loan for example, it still can play a part in a credit assessment decision for some lenders. Obviously, the more stable a borrower who is likely to stay where they are is more comfortable to the financier in that the borrower will not become a flight risk. Part of the credit assessment process is to check how stable a prospective borrower is in their work habits. Whilst this is not as crucial in a mortgage loan assessment for a PAYG borrower, it is much more crucial for a self employed borrower and it will play a part in a credit assessment decision for some lenders. Obviously, the more stable a borrower who is likely to stay where they are, and the more likely that their income is secure, which is more comfortable to the financier in that the borrower will not become a flight risk. Most financiers like to see a self employed person to have been in their occupation for at least two years. There are some exceptions where a borrower may have been in a similar industry as a PAYG and changed across to being self employed under a contract arrangement. Statistical information on the area that the Security is located This another area of checking that takes place. Whilst this is indirectly associated with the valuation assessment part of the due diligence that a financier will undertake is to get the statistics of what happens to borrowers in various areas, and whether there is a trend in a particular region that borrowers tend to adopt. This information is usually obtained by the Mortgage Insurer, and used in their assessment as to whether the property is "located" in a financially secure position. This borne out by the Post Code sheets issued by the various Mortgage Insurers. The mortgage insurer will rate the different areas by codes. "A" code areas are the most popular and is considered safe. "B" code areas, are more for regional areas, and whilst still safe, are potentially more likely to have a higher adverse price reaction in a tough market. "C" code areas will usually be declined out of hand for mortgage products that being written as Lo-Doc, however, will still be considered for a stable PAYG "Full Disclosure" applicant who can prove they are a good lending risk. Statistical information on employment type by area and socio-economic factor This more applies to those lenders who use a Mortgage Insurer. As part of their due diligence, the Statisticians have obtained data usually from the Department of Census to assess the movement of people in a particular area, broken down by age, occupation, sex and family units. Coupled to this will be historical statistical data obtained from various financiers who over the years have clients in these areas. This data then provides a snap shot of a typical borrower in the area and the likely conduct of an account that can be expected. For example a person who is unable to hold down a job in a certain industry may not make a good risk for a financier because they will be worried that the borrower will be unable to find replacement work immediately and therefore get into trouble and not be able to pay their loan. This is enough for a financier to say no to an application in the first instance. As a result a perfectly good borrower may be declined for this reason, particularly if it is a Lo-Doc application. Previous Credit Conduct and history Further assessment of a loan application will include previous loan conduct, particularly where there is a refinance involved. In this instance, a financier may ask to see a copy of the current mortgagee's loan statement to see that the loan has been conducted in an appropriate manner. Usually if more than three payments have been missed in a twelve month period, is sufficient enough to have the more conservative financier's decline an application, particularly if it is a Lo-Doc application. However there are financiers around who will still approve a loan with missed payments with a interest rate loading. Finance Here can assist you with the appropriate lenders who can assist you in this situation should it be required. Other outside influences i.e. Mortgage Insurers, Funder's Restrictions etc There are other factors that can influence a financier's decision to approve a loan. These can range from constraints imposed by their mortgage insurers, or the funding sources from which where the financier obtains their funds to lend to their borrowers etc. Our job at Finance Here is to be the pilot to guide you through the maze and obtain the best possible mortgage product for you our client with an approval. Many borrowers will be declined and will have no idea as to why, yet it could be something simple, which they are not aware of. Our job is to ensure that this does not occur and that you be approved for your loan facility. Accuracy of information provided in your Finance Application Most importantly, is the accuracy of the applicant's answers to the questions posed in the financier's application form. It is important that the information is consistent with your credit file (unless someone has been fraudulently using your name to borrow money). Failure to do so will see the applicant's application declined for not being truthful. Secondly the financier sees it a failure of integrity, and particularly in the case of Personal Loans will get an instant decline. In a mortgage loan application not so serious, however, it could raise questions which maybe awkward for the borrower to answer. It is always much better to be truthful and honest. As long as we know the full story and we can get it verified, we are usually successful in obtaining a loan approval and are enjoying a 98% approval basis. |
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