The five things that could stop you from getting a home loan
THE property market in Rockhampton Region and the Capricorn Coast is on the move in a scenario that excites investors, real estate agents and those hoping to sell.
But at the same time, first home buyers hoping to break into the market become increasingly nervous.
Saving for a deposit is hard and it takes time, and banks also are more nervous.
The latest statistics from HashChing revealed that 41 per cent of mortgage brokers believe a quarter of all home-owners given mortgages last year would be rejected if they applied for the same loan this year.
Current trends show a move towards long term renting, but for some people the dream of owning their own home is still at the top of the bucket list.
So what are lenders looking for and how can you put yourself in the best position to get a home loan and break the rental cycle?
HashChing broker, Collins Mayaki says he's seen five things that always raise red flags for lenders.
1. Bizarre or spontaneous spending habits
It is common knowledge that gamblers struggle to get loans, but what many might not know is that lenders are now going through individual bank statements with a fine tooth comb.
So, if a borrower is an eBay enthusiast, Afterpay addict, or has an excessive number of entertainment subscriptions - they might be in trouble.
This is because lenders create financial identities for loan applicants to help determine what kind of a borrower they are.
Lenders will look at what kind of lifestyle the applicant leads and whether it is within their budget. Can they afford their social life, travels and hobbies? Are their chosen activities risky?
Banks are unlikely to lend to someone living beyond their means.
● Spending habits
Having unusual spending habits, such as frequently spending thousands of dollars on active wear or Gumtree, will trigger concern for lenders as it is outside of the norm.
If there is no reasonable explanation, the applicant will likely be considered a risk.
All potential lines of credit, such as credit cards and store cards, are factored into an applicant's monthly expenses as if they are completely withdrawn - regardless of whether the credit issued has been used or not.
That means if you have a $20K credit card but haven't used it at all (or it's fully paid off), the bank will still regard it as a $20K debt.
2. Questionable credit history
An individual's credit rating represents their ability to manage their finances and live within a budget.
A perfect credit score is rare; even the financially savvy tend to have a few red flags on their record. This is because if an applicant defaults on a bill - even a small one - for longer than three months, it impacts their credit rating.
This can reduce an applicant's chance of receiving home loan approval for up to five years.
3. An unstable employment history
Stable employment illustrates that the applicant will likely have continued access to a set minimum income. Generally, lenders require an applicant to have held the same job for six
months or to have moved into a similar area after previously holding a job for at least two years.
4. A criminal record
Lenders want to know what the applicant's track record is when it comes to the law.
Even if an applicant has a good credit rating and money in the bank, a history of felonies such as domestic violence, drug changes or assault would hold them back.
To the lender, criminal offences show volatile character and an increased chance that they may encounter fines or incarceration, making the applicant far less likely to service the loan.
Not disclosing all expenses can land applicants in hot water.
Lenders have access to potential borrowers' bank statements and will uncover everything, whether it is a sneaky credit card or childcare fees. If the lender picks up on expenses that are not accounted for, it
can reject the applicant on the basis of non-disclosure.
HashChing CEO Mandeep Sodhi encouraged anyone without a perfect record to talk to a mortgage broker. who can negotiate on your behalf.
"They can negotiate on the borrower's behalf, granting them access to opportunities and deals they otherwise wouldn't have," he said.
"They speak the same language as the banks."