About half of new home mortgage applications have been rejected by cautious lenders worried that borrowers will not be able to meet stringent new terms, underscoring the need for buyers to adapt to changing markets and conditions.
Mortgage brokers said so, adding that 90 percent of borrowers who received pre-approval for loans, which lenders estimate based on the applicant`s financial position, were cut by the time the loan was finalized.
"some mortgage brokers told their borrowers not to waste time applying for loans from major banks because it was too difficult to pass." Presley (Simon Pressley), managing director of Propertyology, a buyer`s agent, said.
Mortgage brokers said borrowers who were eligible for six hundred thousand yuan in real estate loans four years ago now have a hard time applying for half of their loans, even if they have a full-time job, impeccable credit history and guarantees.
"A growing number of brokers recommend non-bank lenders with `streamlined regulatory procedures`." A small, unauthorised deposit-taking (ADI) could offer competitive loans to investors and homeowners, Presley said.
But (APRA), the Australian prudential regulator, retorts that it does not monitor non-ADI. banks as strictly as it does on major banks.
Lenders also require mortgage brokers, who act as intermediaries between borrowers and lenders, to gain insight into customers` financial history, current revenues and future plans.
These details will then be provided to the international credit institutions, matching the customer`s financial history, existing loans, payment history and any combined record of default, deferred payment or bankruptcy.
Many banks still use higher-than-basic measures of household spending, meaning they may continue to tighten their loans, according to Tic:Toc, an online lender. But they are also campaigning for borrowers who have jobs, good credit records, large down payments and income, who can easily pay home loans.
Lenders such as Federal Bank (CBA) and Melbourne Bank offer discounts of 50 to 130 basis points for eligible borrowers and greater discounts for larger down payments, such as 20 percent.
Other lenders are offering cash incentives to pay for the law and bank costs of buying properties.
Mortgage brokers claim that most of the rejected applications are because applicants are unable to understand or accurately provide detailed information about their cost of living.
"many borrowers have significantly underestimated their spending." "they really don`t know how much they`re spending," warns Ramsey (Christopher Foster Ramsay), head of Foster Ramsay Finance, a mortgage broker.
The new mortgage crunch was triggered by fears of rising property prices and record levels of household debt.
According to Ramsey, applicants who do not receive unconditional approval should cautiously promise to buy a house before obtaining unconditional approval from a lending institution. Because lenders may not accept the houses they want to buy, lending policies may change and lenders` valuations may not match borrowers` expectations.
Check list before applying for a mortgage
Check your credit file. The lender checks the applicant`s home, personal or car loans and credit card records from any institution. You can obtain a free annual credit report from Illion,Experian and Equifax.
Master the bill and pay on time. "if you can`t pay your credit card on time, the bank will hesitate to extend your extended loan or credit." Shabanz (Ayda Shabanz), a director at Grow Consulting Group, a mortgage brokerage firm, said.
Have a comprehensive record of credit transactions and earnings. This includes a proven three-month rental payment record, and if you are an investor and continue to rent, you should provide details of overtime, bonuses and commissions. Brokers will be asked to keep an eye on any signs of financial difficulties, such as overdraft accounts, gambling and usury.
Check the value and location of the house. The standard residential property in popular postal area should be fine. But smaller properties below 50 square metres in high-rise buildings or remote areas are increasingly likely to be rejected.
Purchase of flats to pay attention to financing risks. If markets get worse, indicative pre-approvals from lenders may be rejected at a later date. No lender will promise to approve a home loan application until the property is completed and valued.
Buying a house at an auction is becoming more and more risky, as you buy a house without the approval of a formal lender. You cannot obtain prior approval from the lender before the auction because there is no agreed price and the property is usually not valued. Banks are increasingly worried about the risk of repayment in volatile markets. Brokers advise clients to have a large down payment, usually about 20%.
