When it comes to securing your home loan, you need to be prepared to jump through some hoops to make it happen.
You’ve found the home of your dreams and your offer has been accepted – now all you need to finalise the purchase, is an answer on your home loan application. You’ve already assembled a ton of paperwork for the application, from payslips to employment letters, bank statements, tax returns and expenditure declarations, so you’re pretty confident that the final answer will be “yes”.
But things don’t always work out the way you expect, says Shaun Rademeyer, CEO of BetterLife Home Loans, SA’s biggest mortgage bond originator. “Even if your credit record is great, you can still be turned down for a loan because of inconsistencies or gaps in your documentation.” For example, you may have forgotten to mention that part of your stated income is derived from a second job. Or if you are buying the property with someone else, it may have slipped your mind to detail their monthly expenses.
Why this is a problem
This may seem trivial to you, says Rademeyer, especially if you believe that you will have no trouble making the monthly bond repayments. It is also much less likely to happen if you apply for your loan through a mortgage originator such as BetterLife Home Loans, which has experienced loan officers to advise you upfront about what the different banks may require when assessing home loan applications, as well as about what further legwork may be required.
“However, aside from assessing the risk in each loan, lenders also have to apply very strict rules to ensure that you will not become over-indebted if they grant you a bond, and therefore they are entitled to double check anything that raises the smallest red flag”, explains Rademeyer. “At that stage they will most likely also ask for more documentation or evidence that will enable them to decide if you will manage the instalments or not. Our advice to prospective borrowers is just to co-operate and try to provide whatever additional paperwork is requested, whether it is more bank statements, proof of the source of your deposit, or detailed financial statements if you are self-employed”, he advises.
The bottom line
According to Rademeyer, the lender would not be asking for additional information unless it was necessary to complete the approval process. “The banks are relatively keen to approve new home loans at the moment, but a quick denial will nevertheless be forthcoming if you get hot under the collar, refuse to provide what they have asked for and insist that they evaluate your application using what you have already provided”, he says. “Basically, you are asking for someone to lend you money to buy your home, and you need to be prepared to dot the I’s and cross the T’s until they are convinced that this a good idea.”
There are processes in place that ensure that home loans are only granted to people who are in fact are in a position to bear the financial burden - this is done to protect both the lenders as well as the applicants. Therefore, it’s important to remind yourself that the banks won’t ask for anything that isn’t absolutely crucial to getting your home loan approved in the long-run, so you should be prepared to jump through as many hoops as it takes.