Bank guidelines
When applying for a mortgage, no doubt you have shopped around for the best interest rate and lowest fees. However almost nobody checks to see if their application meets the lenders guidelines & credit policy!
You see, the problem is that lenders don’t publish their rules to the public. That would make it too easy for people to find loopholes and “game” the system. Every financial institution in the USA, UK & Australia has its own set of rules they must abide by before approving a mortgage.
The credit assessor in the bank who signs off on the approval must follow the guidelines which has been created by the bank, otherwise they risk losing their job. For this reason credit policy is often treated like gospel, and it is rare for policy exceptions to be made.
Each financial institution lending money has different guidelines with specific differences and certain things they cannot approve. This is where the assistance of a mortgage broker is essential as they have knowledge and access to all the lenders guidelines to make sure that your application is perfect for the bank that it will be placed with.
For a standard application with a large deposit, long term employment and no credit history issues this is considered as the perfect application for a bank & will be accepted by everyone. But let’s be serious, not many applicants are like this. Many people have credit impairments, short term employment, unsecured debt, a small deposit or a combination of all of these.
What is in the Lenders Guidelines?
The Lenders Guideline is the rule book of what the Bank looks at and what they can accept when approving your loan:
- Employment – Banks generally require a minimum of 6 months in current job, most do not accept probation and usage of casual or 2nd Job Income must be evident over 12 months.
- Credit Report – Mainly for credit impairment the lenders guideline will advise how many defaults, amounts or timing of defaults which are acceptable to them.
- Savings – Generally all lenders are now requesting that evidence of the deposit be saved over a 3 month period this being called “Genuine Savings”.
- Age – Although lenders are not allowed to discriminate against age, but they may show a stricter view to people who are close to retirement.
- Security – All Lenders will have a list of what type of securities they can take on, this will also provide of list of types they cannot accept and certain areas that they will not do either. Vacant land is a prime example this will advise the maximize size of land they can accept.
- Types of loans – The Lender Guideline will outline what type of loan the bank can accept from purchase, refinances, low doc, guarantor loans, trusts or company purchases.
- Documents – from payslips to tax returns this will outline what is required for each client.
As you can see the guidelines are complex. However the key is that they vary between lenders! Apply with the right lender and your problem is solved! The best way to find the right lender is to use a mortgage broker who specialises in the credit policy of each bank.
About the Author
Otto is a Mortgage Broker that has specialised in the bank policy of several major lenders for over 7 years. His company the Home Loan Experts is now one of the top home loan broking firms in Australia.
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