Applying For a Mortgage? What the Bank Wants to Know About You (Early 2009)

By Hamish Patel
Applying for your first mortgage can be a daunting task, sometimes even embarrassing. But luckily these days there are a lot of professionals in the industry who can make this task easier. The following is some insight from one of these professionals.
 

When you turn up at the doorsteps of a Bank looking for a mortgage, you can feel quite vulnerable. There you are in front of a perfect stranger ready to expose your financial situation and ready for judgment. Of course you could use a good mortgage broker to ease the process. But at the end of the day how should you present yourself, what should you wear, what tone of voice should you use?
 

The days of sneezing and winking to become eligible for a mortgage are gone, now lenders are actually looking at your situation. Lets break these down into some simple areas.
 

1. What will you use the money for?

2. How much are you going to put on the line?

3. How did you get the thing you are putting on the line?

4. What kind of a person are you?

5. What kind of repayments can you afford and how much will you have left over?
 

Now you don't have to have the right answers for every one of these questions, some of your answers can be good, some rubbish, but if the good ones out weigh the bad ones, you might have a deal. Lets go through these in detail.
 

1. What will you use the money for?
This big debt you are taking on, is it for something which will be hard to walk away from? The harder it is the better really for the lender. For example if I want to buy my first home to live in, I am probably going to keep paying the mortgage to keep the roof over my head, this will be one of my top priorities. If I am looking for a loan for my 4th investment property or so I can buy my cousin a car, well you get the picture.
 

2. How much are you going to put on the line?
At the time of writing this most lenders are opting for you to be putting at a 15% - 20% deposit for a home loan for them to start feeling comfortable. Again this can be less if your other answers are really nice.
 

3. How did you get the thing you are putting in the line?
A lot of mainstream lenders have gone back in time and actually now care about how you got that deposit, or equity in that property. If you have been gifted the whole amount, lenders will probably want you to put in 20% or more. If you have saved a lot of it and have bank statements to show regular amounts being put away, then lenders can be comfortable with less of a deposit.
 

4. What kind of person are you?
To think of you as a suitable candidate most lenders will want to see that you have been with the same employer for a few years or in the same industry at least. How often do you change your place of residence also comes into mind as well as your credit history. Of course how attractive you are as an employee also plays some part here, things such as your qualifications and the strength of the industry you are in.
 

5. What kind of repayments can you afford and how much will you have left over?
Mainstream lenders require a detailed budget showing exactly what you will spend your money on after taking the loan. Of course lenders have always looked at this but ow days the detail and realism is what is important.
 

With the current lending market it is important to present your case in the best possible light to begin with, the last thing a lender wants to do is re look at a declined deal.
 

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