Page 50 - Smart Money

Chapter 2

All the banks can see that you have made multiple credit applications and
unless you have a good reason, even if they don’t check your credit score,
they are going to want to know why all the other banks have declined, or
why you haven’t gone with the other banks.
As I mentioned earlier, you should also be careful about blindly trusting a
bank’s assessment of how much you can afford to borrow. For example, the
bank might say that, based on your income, you can borrow $1,000,000,
but you need to have the right deposit in order to do that in the first place.
It would also mean that the repayments are quite high, even though the
bank thinks you can afford it, you need to work out what the repayments
are and put it into a budget to make sure that you can actually afford it
without sacrificing too much of your leisure time activity.
There is another consideration when deciding the loan amount you can
comfortably afford. If your budget is already struggling, and interest rates
go up to 17%, this could be financially catastrophic. Naturally, the higher
the interest rate, the higher the repayments. When it comes to borrowing
capacity, a broker can help to assess your needs after completing a simple
fact find process.

Pre-approval

The next step in the process, after we get all the information from you,
all your documents, is to lodge it with a bank. The bank then does a
credit check, verifies your income by looking at your payslips, makes
sure that it all definitely fits their policy and, if so, issues a pre-approval
or conditional approval.

Key Point
It is important to get a pre-approval, because although the broker might
think that the bank will accept that income, they may not. So instead
of just doing our homework, once we select the bank, we submit it to
make sure that everything sits okay with the bank.