What if you’re not a conforming borrower to get approved for a mortgage?
It was very easy to get a loan to buy a house in Australia prior the GFC. Many borrowers were capable of accessing as little as 95%, 100-105% or 100% of the actual value of their home with minimal hassle.
Australian banks and lenders took steps to avoid future losses after the credit crunch. They made lending guidelines more restrictive for borrowers at high risk.
“It’s tough qualifying for a home loan in today’s tight lending market, but it’s even tougher for the estimated one in four aspiring home owners or existing borrowers who, for various reasons, don’t fit mainstream lenders strict lending guidelines,” confirms property and finance expert Peter Boehm, co-founder of Top Choice Home Loans.
“The hard line that banks and other mainstream lenders – and their mortgage insurers – are taking on even the smallest misdemeanour makes it near impossible for those with even a small blemish on their credit file to get finance.”
Who are the non-conforming loanees
Non-conforming borrower are those who don’t conform to credit guidelines set by mainstream lenders. They’re generally seen as a higher lending risk, which is why they may find it more difficult to get a standard home loan.
Boehm states that you may be considered a non-conforming borrower if you do these things:
- Are you self employed?
- You just started a new company
- Have a tax debt
- I have made many credit applications.
- Do you have the ability to save very little or nothing?
- It is possible to change jobs frequently, or you may not have job stability.
- Many other debts, such as credit cards and personal loans, are also available
- Are you in the final stages of your retirement?
- Are you a new Australian resident? If so, we can’t verify any previous credit histories
- Credit denied previously
What are your options
You should only choose a licensed mortgage broker with extensive experience in providing nonconforming loan options.
Before you do, however, make sure to visit www.mycreditfile.com.auClick here to download a copy your credit history. It is important that you verify the accuracy of these entries.
“If there are any problems or errors, contact the credit reporting agency immediately and get them corrected, and pay off any overdue accounts as soon as possible,” Boehm says.
“Although they won’t immediately be removed from your file, they’ll be shown as ‘paid’ which may help get you get a better deal.”
When you apply for your loan, don’t try to hide anything from the lender: as well as being unlawful, it’s important that you give a true and full account of your financial situation so that you don’t wind up with a loan that you can’t afford to maintain.
Take the time to shop around. “There are a number of specialist mortgage brokers and lenders to choose from, so go online to see what’s available,” Boehm says. “Ask questions and look for the best deal by assessing the non-conforming lender as you would any other lender. Take a step back and reflect on what you’re being offered, and remember – you don’t have to sign up for the first deal you get.”