Low Doc Loans
Non- Confirming loans. Having trouble getting your act together but still need a loan to buy that perfect house you just saw on line, looked at on the weekend and then made an offer – which was accepted….. Now you are staring down the barrel of a number of deadlines - finance clause -settlement date -financials and tax returns…. Hang on I forgot I don’t have any financials for the last two years but my spouse/partner significant other is working at a normal job so that should work.. You go to the bank and when the call center person stops laughing because you don’t have the same income as the loan you need you hang up and then depression sinks in.. Welcome to the world of non-conforming lending, this title covers a multitude of sins or opportunities… depending how organised you are. So what is a non-conforming loan? It’s one that falls out side the square and there are many reasons why loans fall outs ide the standard box these days. These include but are not limited to Discharged Bankrupts Unpaid and paid defaults. Arrears on existing facilities. Behind in tax liabilities. Tax returns not due for years, no financials available. Bas statements only proof of revenue. There are some of the reasons and when you add them together or maybe even add multiple defaults due to divorce from spouse or business partner, that dream hom gets futher and further away. The good news however is that there are a number of players in this non conforming space, that means like all things in the open market there is not only an opportunity to get your loan but there is also competition. Add to that a record low interest rate environment and your rate (will e higher because of the perceived risk) will not be double digits. These lenders use a traffic signal style systems to rate the loans, red for 1 day ABN and 1 day discharged bankrupt, yellow for longer term discharges and not too many arrears discharged for greater than 12 months, and green for everything is good to go. These lenders are very experienced in this space and believe me tell them the truth about how you got into trouble, there is not a story they haven’t heard and they see so many of these types of loans they really don’t care about your problems they get paid to get loans approved and if they don’t lend then people don’t get paid. When we have dealt with these in the past people are understandably shy to talk about what happened and what the problem is, believe me with these lenders nothing is too bad. The bottom line for them is what is the security like and can they afford to pay the loan now, you still must have an income but what happened in the past is exactly that THE PAST. When you hear stories from them about consolidating 40 credit cards (how they got that many I don’t know?) and all sorts of personal loans and tax debts etc, you realise you will struggle to find a worse loan for them. Some of these lenders are Pepper, LaTrobe Financial, MKM, Bluestone and some other smaller lenders. They are doing well during the royal commission environment and their loan books have been growing monthly as at July 2019. The items you will need for these lenders is a bit different as they supply some of the documents you need, including but not limited to Accountants declaration, to be signed by the accountant and given to thelender. These forms are often hard to get signed by some accountants and the lenders have put in a clause now that states that they (the lender) wont hold the accountant if something should go wrong. Applicants declaration, to be signed by the applicant and will most likely be conferment by the lender. 3 to 6 months BASS statements. This is to give an idea of turnover. Copies of all the statements that are going to be refinanced if that’s the purpose. ID’s and a copy of the purchase contract. Remember it doesn’t matter how bad you think it is you are not an Ireland and I can guarantee that they have seen much much worse. One thing we need to note though is that the absolute most you can get is 90% of the purchase price and even then 80% might only be the max, work on an 80% lend and anything higher ratio wise is a bonus.
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Documents every lender needs
Documents required. This is by far and away the area that holds everything up, everysingle lender will use missing documents as a cause for delay. That is why being organised is the most important way to cut through the BS and get you loan processed. What do they want and why, lenders are now moving to what I call a weight method of approval, the heaver the loan in terms of paper the closer the loan gets to an approval, don’t worry if its not relevant everything they ask for ultimately adds to the weight of the file and when it attains that imaginary weight the loan gets assessed then approved… What are they looking for and why? First and foremost is servicing, can you afford it? This particularly in July 2019 this is extremely important. These days were people don’t have the permanent jobs they used to servicing is getting harder for them to get their head around. Most basic form of income verification is payslips, most institutions are happy with 2 as long as they have a year to dat. Some want 3 that have the same info as 2 but then the file will weigh more so that better. You have so many variations on this now, Full time, part time, permanent part time, casual. (Just for the record there is no such thing as full time casual, y=if you don’t get sick leave or holiday pay your casual and will be treated as such) Some lenders have different rule about the length of time you can be casual it varies and it pays to do the research. Self-employed, the most difficult and confusing for credit assessors, unless they are non confirming loans and then they turn to the accountant with a simple letter. 1st tier lenders require 2 years financials for assessing a loan and as well as the company returns, they need personal returns and the profit and loss. This varies but the lower the rate the more information they will need. They also require bass statements to ensure that the tax liabilities are up to date or at worst case under arrangement. When you move towards the non confirming space these requirements peel back to as much as a simple letter but then the rate goes up, so the more organised you are the lower the rate will be. Government benefits, lenders accept some forms but not all, and even then there are expiry dates on them, for example you get family allowance up to the age of 18 but lenders calculate up till 12 or age 15, go figure.. Security, lenders will always want a copy of the contract when you are buying or building, they give this to the valuer who copies the purchase price on to their report and then charge you money for the report. Nice work if you can get it. If you already have the property being either a house, unit or land they will then require a copy of the council rates, then they will also do a title search to see who has the current 1st mortgage and make sure there are no nasty surprises on the title. When you give the lender your council rates ALWAYS make sure they are up to date. Refinances and debt consolidation, there are many lenders who will consolidate debts and they are now also putting these debts into a separate facility or loan and putting them over a shorter time frame, in other words, they may refinance the combined debts at say a 5 to 10 year term so that the debt is paid out. You will need up to 6 months statements on these debts and depending on the lender if there any arrears they may or may not accept any arrears, the most important thing for the lender is that you are better off, reduce you monthly commitments and improve you overall position. These include, credit cards, store cards, personal loans, private debts to parents for example, leases, interest free facilities and depending on the lender (as 1st teir banks don’t do this ) tax debts. These are the broad categories, when you look at individual circumstances we start to see more paperwork bubble up and hence the weight of file theory, however, people are organic and everyone is different. Lenders try and jam organic into static policy everyday and out pops the loans. Remember the key to a quick result is to get everything to the lender as soon as possible and avoid the delays of “we are just waiting on x”
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What to do if your loans declined.
Fear of the declined loan But what if they say no it’s over right? Wrong, In lending these days a no is another step closer to a yes. They key is to remember that there are dozens of lenders out there. All these lenders need to write loans so that they make money. There is no point have a draw full of money it doesn’t make a return for them, they need to lend it and in order to get more market share, so they need to a what’s called a policy niech that differentiates them from the others. That one bit of policy that’s sets them apart from the other lenders. Lets for example say you have been searching the internet for the cheapest loan, you apply and it comes back with the reply declined does not our lending guidelines, or word to that effect. Most of the time people will accept this and think oh well it wasn’t to be. WRONG first of all find out why, you may have miss entered something or forgotten to add some income or deposit there could be many reasons. Second do some more research talk to some lenders first, get a feel for what their policy is, what they will and won’t accept. Talk to them about your situation and they may be able to accommodate a little bit of variance. All lenders have the ability to think outside the normal lending guidelines, but they need to get to know you first and that’s why they ask for statement and history, if there are signs its good then they will try and give you a go. If you discover that you have a default there are actually things you can do about it. You can accept the decline and wait for the default to fall off your credit report, they are there for 5 years from when they are listed to when they fall off. They can also be removed through credit repair agencies. Try this option because we have had luck with these over the years, I personally recommend these CRAZY limits on their credit cards. I’m talking over 50k to 75k and there not using anymore than 5k per month. When you broach the subject they always reply that it’s there “just in case”. In case of wat you need a new Merc… at 21% really…. These limits accrue over time especially when they used to post out letters upping peoples limits automatically, it didn’t take long if you were a good payer for these limits to evolve. The key then is to drop the limit down to something more manageable, say to 10k this will impact you servicing massively. It can improve your servicing by approx. $3k per month. Other reasons for declines can ofeten be due to the valuation especially 2nd hand units, there is also other title types that lenders don’t like such as leases, these are long term to a state of federal governments over long periods of time. They are difficult to get approval on especially from the non bank lenders. Previous history is often another reason, if you have arrears that appear on your statement, then new lenders are very shy of these, this is were the non-conforming lenders are better, if you can get over to a non-confirming lender and get 12 months of good steady repayments then you are better off paying a bit more in interest for 12 months, get some good history and move to a 1st tier lender. Remember a no is another step closer to a yes, but you must not give up, keep talking to lenders. Also go to a good broker who has a lot of experience, I have seen a lot of people get looked after as the broker gets paid on settlement, they are motivated to lend not sit back and accept a decline, they will also go into bat for you and get the loan across the line. It’s a bit like dating there are plenty of fish in the sea and there is always some for everyone.
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