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How to Stand Out Amid Tighter Lending Tests

How to Stand Out Amid Tighter Lending Tests

Being capable of paying off a mortgage is one thing. But convincing lenders that you’re mortgage-ready is an entirely different story. With Australia’s competitive and tight lending standards, here’s how you can ace the loan application process.

The Australian Prudential Regulation Authority (APRA) is now cracking down on banks and lenders to raise the bar for loan applicants and tighten their lending standards.

As a result, finance applicants are taking the blow as banks squeeze them, rejecting more customers than usual.

Here’s everything you need to know to get up to speed on how to pass the lending test.

Why the Tighter Lending Standards?

After Australia’s Banking Royal Commission implemented this policy, lenders will now ask you for detailed financial statements along with living expenses when evaluating your loan application.

Now, applicants should explicitly prove to APRA that they can take on the loan and have done their due diligence to indicate positive borrowing power.

If the regulating authority doesn’t give exceptions to lenders, they will leave no room for exceptions to the customers.

Tightening the lending standards led to more in-depth scrutiny of the applicant’s spending habits and financial accounts. If the bank finds unusual transactions or poor financial health, they may decline your loan application.

It all boils down to making honest transactions, clean expenses, and sustainable savings that fit your application. Integrity and honesty are crucial to establishing a solid application case.

Here are some tips you can follow to do so:

1. Establishing a Household Budget Plan

Using a budget planner calculator should be your first step if you need to track your budget.

Now that you’ve laid down your household expenses, you’ve won half the war. All that’s left to do is stick to it.

That’s because you have to follow your budget plan religiously for the next three months or more and control your expenses to show that you can manage your finances.

Doing this step right should properly lay down your application strength for the following steps.

2. Keep Existing Loans at a Minimum

If you have an outstanding loan, you may want to pay that off before applying for a new mortgage. Banks might get skeptical if they find existing debts to your name with the lending standards a notch higher.

But if you have other debts left unpaid, feel free to reach out to us, and we’ll help you consolidate multiple loans into a single manageable account for a lower rate.

3. Increase Savings

If you somehow managed to budget correctly, you should have enough to put into your savings account.

Having considerable liquidity is crucial since this will provide banks with proof of genuine savings. In other words, that’s an excellent way to prove that you have financial responsibility and can manage your money well.

4. Always Meet Repayments

After establishing your budget plan and ensuring you have enough savings, it’s good practice to schedule your subsequent repayments and ensure you meet them on time. That includes utilities and subscriptions.

Keep in mind that late payments reflected in your account can translate to a significant red flag for your loan application — and nobody wants that.

That’s why we recommend setting reminders on your calendar — paper or app if you can’t opt for direct debit.

5. Keep Living Expenses Justifiable

To top your preparations off, make sure you can fluently and confidently explain your living expenses during your loan evaluation.

It all boils down to proving that you can genuinely save and manage your money, make on-time repayments, and adequately handle your debt.

Reach Out Today

Participating in the negotiating table can be daunting and outright tricky. But we’ve got your back covered.

We at Plan A Mortgage will sit down with you and discuss your financial circumstances to know which loans work best for you.

If you’re looking for finance or just want to get a headstart on what to prepare to meet the higher standards, speak with us today, and we’ll let you know how we can help.

Disclaimer

This article presents content in a general nature and is solely for informative purposes only. It does not aim to provide public nor personal financial or tax advice. It does not include nor put into consideration your unique situation or circumstances. Before taking an active decision, seek expert advice and thoroughly examine your current position. Moreover, this article is protected by intellectual property and copyright laws and should not be reproduced without prior written consent.

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