Is it harder to borrow money for a home loan at the moment?
- Whether COVID-19 restrictions have made it harder to secure a home loan
- Whether banks are being stricter when they assess home loan applications
- How long it’s taking banks to assess and process loan applications
- What types of home loans and mortgages are harder to get approved
- How to make it easier for the bank to assess and process your home loan application
Have COVID-19 restrictions made it harder to secure a home loan?
If you’ve been financially impacted by COVID-19, then yes, it will likely be more difficult to secure a home loan at the moment.
People who work in industries severely financially impacted by COVID are finding it challenging to secure finance at the moment. Examples of impacted industries include (but aren’t limited to) retail, hospitality and aviation.
However, in general, there hasn’t been any stoppage of credit flow for borrowers who haven’t been financially impacted by COVID.
If your loan application is reliant on your overtime income, you may also find it challenging to get your home loan approved. Many banks won’t accept overtime income at the moment due to COVID-19 restrictions.
Banks are still lending money, but (depending on your circumstances) the process may be more involved than usual – keep reading, we’ll explain what we mean by ‘more involved’…
Are banks being more strict when they assess loan applications?
Some banks and lenders are going through home loan applications with a fine-tooth comb and are closely scrutinising living expenses.
Certain banks and lenders are forensically investigating bank statements. They’re going through your bank statements line by line to verify your living expenses and salary credits.
Depending on the bank you lodge your home loan application with, you may be asked for additional documentation, evidence or information during the assessment process, particularly if you’re self employed. The bank asks for this additional information so they can make sure your income is inline with what your income tax is suggesting.
Is it taking longer for banks to approve home loans?
Let’s talk about timelines. Some banks are taking longer than usual to assess and process home loan applications and mortgage refinances.
The good news is there are plenty of banks and lenders that are still super efficient, with fast turnaround times. An experienced Mortgage Broker has the inside scoop on which banks are speedy and which banks are slower.
Over the past few months, several lenders, including the big four banks, have reported delays in their turnaround times for loan applications.
For example, back in May (2020), ANZ has previously publicly acknowledged its shortcomings with its processing times increasing from an average of 10 business days in April to 22 business days in May.
COVID-19 related restrictions have slowed things down. Also, several banks are offering cashback deals and they can’t keep up with demand.
Which types of home loans or mortgages are harder to get approved?
Some types of home loans and mortgages are more involved, they may require more paperwork, documents and evidence and/or they may be more complex and tricky.
For example, a home loan application becomes harder when you ask for the bank’s lending policy to be flexible. In the mortgage industry, we call this ‘asking for an exception’.
An example of asking for an exception is if you’ve been self-employed for 12 months but the bank’s lending criteria requires the business to be established for two years. Asking for an exception can complicate the lending assessment. And there’s a good chance, the bank’s lending assessor may not grant the exceptions you’ve asked for.
We usually advise clients to lodge their application with the bank who’s lender criteria they meet. We prefer to avoid trying to ‘jam the deal’ with a bank with lending criteria that you don’t meet, even if they’re offering a lower interest rate.
Another example of asking for an exception is if the borrower is an entity (for example a trust). Which means you’re purchasing a property through an entity. There’s a lot more paperwork involved for this kind of loan. You’ll need to provide more documentation to the bank when the borrower’s an entity than when the borrower is a ‘natural person’.
How can you make it easier for banks to assess and process your home loan application?
- Make sure you provide all the documents that the bank’s requested
- Don’t try to ‘jam the deal’. Find a bank and loan product who’s lending criteria you meet
- Work with an experienced Mortgage Broker. Banks change their lending criteria and policy regularly. An excellent Mortgage Broker know the banks’ lending policies inside and out, and they’re up-to-date with any changes, so they can match you with the right bank and loan product for your circumstances. They also know how to package your loan up and present it to the lender correctly
So, IS it harder to get a home loan now?
Well, it depends…
Banks are still lending money for home loans, mortgage refinances, property investment loans and car loans.
Whether or not it’s harder to get a loan at the moment depends on your circumstances, the type of loan your applying for and the bank your lodging your home loan application with.
Just be aware that you may be asked to provide additional documents and information and your loan may take longer than usual to be processed.
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