What a lender Wants to know
The Quick Version
Character - Who are you?
- What is your address background / working background income / commitment / asset and liability positions
- Past borrowing history
Most lenders will require a credit check.
Loan to Value Ratio - What deposit do you have?
- A Loan to Value Ratio is the loan amount as a % of the property value. Eg, you want to buy a house for $100k and you need to borrow $85k – this is an LVR of 85%.
- The higher the LVR the more scrutiny involved with assessing a loan.
Servicing - Can you pay the loan back?
- A lender has a responsibility to ensure you are in a position to pay the loan back
- Lenders will analyse your income and commitments in conjunction with the new loan you are looking for
- The higher the impact the loan has on your monthly cash flow the more scrutiny involved with assessing a loan
slightly more detailed
When lenders assess a person for a loan, they basically want the answers to some simple questions. This applies to most people buying a residential property.
Who are we lending money to?
They want to know:
- Your identity – by law
- Your contact details
- Where you live (now and over the past 2 or 3 years)
- What you do for a living (now and over the past 2 or 3 years) (by law) your identity
- Your income levels
- Your asset (what you own) and liability levels (what you owe)
What do you want the money for?
Buying a residential property – for private or investment purposes
Refinancing other loans
What is securing the loan?
In each case – in our industry – the security for any loan will be residential property. However, lenders have different policies in relation to what types of property is acceptable.
What is it worth?
Most lenders will want to know how much the security is worth so that they can gain an idea of how much money they can lend you as a % of the value of the property (this is known as a Loan to Value Ratio)
In many cases, lenders will arrange their own valuation of the property.
How much do you need to borrow?
Lenders will assess your loan requirement to ensure that it is an acceptable % of the security value
Can you pay the loan back?
Lenders will assess your income and commitments to ensure that by lending you the money, you are not being placed into a precarious financial situation. At Vision we promote the concept of responsible lending.