How do lenders assess applications?
While loan officers work solely for a lending institution and can only offer that institution’s products, brokers can help connect you to the lender best fit to serve your mortgage needs by shopping around on your behalf.
Finance brokers on the other hand are paid commissions by lenders to match borrowers to the right products and can negotiate the lowest rate on your behalf, which is why more than half of borrowers today turn to finance brokers when it comes to finding a home loan.
In order to decide whether or not to provide you with a loan, lenders will generally assess you against five qualities.
- 1. Your ability to repay the loan
To establish your capacity the lender will look at your employment history and salary to evaluate whether you have enough cash coming in to reliably pay the loan over time.
- 2. How much cash you have up front
Assessing your ability to put down a percentage of the value of the property being purchased up front is standard. The percentage varies though, and some specialist lenders may approve a 5 percent deposit.
- 3. The property valuation
Since the property is used as collateral if you are unable to repay the loan, the lender will value the property. Based on the report, the lender will decide whether the property is worth the loan being approved.
- 4. Your financial history
Your credit rating, expenses and debts will help the lender assess your reliability as a borrower and whether you are worth the risk.
- 5. Market conditions
Economic circumstances in the market can influence what interest rate you have access to and whether you need to provide extra security. They can also influence the repayment schedule.