In the past few months we’ve seen the major banks and other lenders make further changes in lending policy to investors. This effects loan application procedure.
This was in response to calls made from the Australian Prudential Regulatory Authority (APRA) in an effort to curtail speculative housing investment.
Add to this some fluctuations in the global financial markets, an election both here and in the US, Brexit, the usual misinformation in the media about the Australian housing market and we find ourselves in uncertain times.
However, one person’s uncertain times, are another’s opportunity seized so we thought it would be timely to mention some pitfalls you need to avoid if you want your finance application to go through smoothly.
Not providing requested information
Banks are stringent and are asking for more information than ever when assessing finance applications. Providing the requested information within 48 hours will keep the loan process moving along. Outstanding information can result in the loan stalling completely and losing its place in the lenders processing queue.
At times the requests for additional information from the lender may seem obscure and annoying, however this information is needed to satisfy their internal lending policy and contractual agreement with you. No information, no loan!
Agreeing to short settlement and finance approval periods
During periods of for example, high loan volumes, special promotions by the lenders, your assessor going on holiday, your internal bank service levels are often overstretched. Settlement dates of less than 28 days from sale contract date can be extremely difficult to meet and are not recommended.
Penalty interest (or even forfeit of deposit) can result if you miss settlement. Short finance approval dates are similarly difficult to meet and may result in the property being returned to the market. Allow yourself plenty of time, consult with your broker and make sure you remember pitfall number one.
Changing the structure of the loan application after lodgement
When changes in loan structure (or loan product) are made after lodgement, it will return the submission to the lenders assessment area and reset the clock, which may risk settlement not being met on time. Talk to your broker about what you are going to do BEFORE you need to do it.
Returning loan documents late (and altering loan applications)
Returning your signed loan documents to the bank within 48 hours will maintain the process pipeline and minimise the chance of your loan being de-activated by the bank or missing settlement. Altering original loan documents will mean that the documents will be automatically re-issued by the bank and add to delays. Returning incomplete loan documents (eg. missing signatures) will also add to delays.
Being absent or unavailable during the loan process
Having an offer accepted and then going on holiday or away for extended periods during the loan assessment or settlement process is not recommended. It can lead to big delays with your finance if additional information is requested by the lender or if original documentation needs to be signed quickly and you are not there. Never assume that the process will run smoothly. Believe us when we say that the unexpected can happen and you need to be available to deal with it.
Requesting exceptions to bank policy
Lenders are becoming increasingly less flexible in relation to making exceptions to their policy. If your submission falls outside of normal bank policy it can make a positive outcome extremely difficult. Recognise that what you are expecting is an exception to bank policy and comply with the lender’s and broker’s request for information.
Non-disclosure of important information
Non-disclosure of information can bring the bank assessment process to a shuddering halt. Don’t try to hide anything, they will find out. This information may include:
- Loans that you have applied for and not proceeded with
- Other loans, credit cards or store cards (even those you don’t use)
- ABN, self-employed activity and directorships of companies (the bank will want to know if the business is trading profitably without unsecured debts)
- Previous defaults, court orders or bankruptcies
Borrowing criteria will continue to change
…so when the bank requests clarification of any of your information, we would encourage you to respond quickly and co-operate by actioning their requests without delay. At times these requests for additional information from the lender may seem obscure and annoying, however this information is needed to satisfy their internal lending policy and contractual agreement with you. At the end of the day, they’re giving you the money you need to achieve your goals, so take a deep breath and make it happen.