Ideal mortgage applicant

Thirsty

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Given that lending is so reduced, and banks are being so much more choosy, what would be the attributes of the 'ideal' borrower?

Zero credit card debt? or better to have history of regular payment?
Permanent employee? do they look at the industry you work in?
Are they favouring those with homes to sell or first time buyers?
What could the average buyer do to 'position' themselves in the mortgage market?

Anyone have info to share?
 
I've recently been through the process so here are my thoughts:

Zero credit card debt? or better to have history of regular payment?

Zero credit card debt, in fact zero debt at all, I've heard of people being told to pay off car loans before applying for a mortgage. I use my cc alot but its pretty much always paid off in full at the end of a month, they wanted to see 6 months of cc statements.

Permanent employee? do they look at the industry you work in?
Permanent employee seems to be nearly essential, contract working in what are seen to steady areas is tolerated, my husband is on a contract and we got a mortgage based on our two incomes.

Are they favouring those with homes to sell or first time buyers?
First time buyers is ideal. Any second time buyers we were bidding against were people who had sold their houses and were renting before looking to take a new mortgage.

What could the average buyer do to 'position' themselves in the mortgage market?
Have no debt (including another mortgage) and show steady savings for at leat a year.
 
What could the average buyer do to 'position' themselves in the mortgage market?

Stress test the mortgage they want at an interest rate of 7%. Prove that you can afford these repayments by showing rent being paid and/or savings for the previous 12 months.

Keep your current accounts consistent, no good months, no bad months, be like Goldilocks - all just right. Do not have any referral fees.

Clear all personal debt.

Be in permanent (not contract) employment in the same company for a minimum of 12 months.

Be able to show a build up of savings over time (not a gift) to cover at least 10% of purchase price. The higher the better.

Pray.
 
Really I see the deals fall apart mostly for down payment or overstating their income. The ideal borrower should just be honest because they are genuinely and fully looking into nowadays.

The ideal buyer has 25% down, beacon score of 800+, steady job, etc.

Credit card debt with steady payment is actually usually quite favourable with the credit score. Credit is rarely understood but paying it back on time is usually the biggest part.
 
Thanks folks, that's all very useful stuff.

Few questions:
beacon score of 800+
What's a 'beacon score'?

Also are banks still working on a multiples of income of salary? or is it now a % of net income?

build up of savings over time
Not a first time buyer, but would have around 50% of purchase price from sale of house, would I still need to show savings?

(You can tell it's a long, long time since I moved house!)
 
Thanks folks, that's all very useful stuff.

Few questions:
What's a 'beacon score'?

Also are banks still working on a multiples of income of salary? or is it now a % of net income?

Not a first time buyer, but would have around 50% of purchase price from sale of house, would I still need to show savings?

(You can tell it's a long, long time since I moved house!)

Beacon score must be in relation to Canadian mortgages according to poster's location.

BOI work on multiples, the rest on % of net income.

You may not have to show savings if you can prove repayment capacity through rent being paid.
 
You may not have to show savings if you can prove repayment capacity through rent being paid
I'm not a first time buyer, though I'm paying a (small) mortgage currently; I've no other loans or debts & am in permanent employment.

Do you know what the multiples / % income they are working to these days?

I'm trying to get a feel for what I might be able to do before I approach a lender with an application.
 
5 times basic, 35-40% depending on income.

Repayment capacity is all important, if you can't prove that you can afford the mortgage repayments then you're at nothing.

e.g stressed mortgage repayments 1000pm, you need to show you are paying 1000pm in combo of mortgage and savings.
 
Hi NorfBank, I know you're in the industry, are the banks lending at present are you finding? or is it still as difficult as it was?
 
OK, thanks NorfBank I understand where you are coming from now.

I'd be interested to hear your opinion on Mwhich's post?

Or does anyone have an idea of which are the best banks to approach?
 
Hi NorfBank, I know you're in the industry, are the banks lending at present are you finding? or is it still as difficult as it was?

It hasn't become any easier but they are still lending to the right applicant. It's just painfully slow to get finance, everything is checked, double checked, mislaid, rechecked, gone out of date, rechecked, approved.
 
thanks Norfbank, my understanding is that approval in principle is given initially. Is this approval given by the underwriters or is it just when the bank manager puts it through their scoring system and tells you what you're entitled to? The reason I'm asking is that I'm hoping to start building sometime soon and am wondering will they wait until I need the first stage payment before they give me a letter of offer or how does it work!
 
Not fobbing you off mwhich but to answer your question would take too long. Every lender is different especially when it comes to self builds these days. You can rely on some AIPs, some are worthless.
 
5 times basic, 35-40% depending on income.

Repayment capacity is all important, if you can't prove that you can afford the mortgage repayments then you're at nothing.

e.g stressed mortgage repayments 1000pm, you need to show you are paying 1000pm in combo of mortgage and savings.

Hi NorfBank

What do you mean by "35-40% depending on income"

Thanks a mill
 
The higher your income, the bigger the percentage of it the lenders will allow you to use to cover your mortgage repayments.

e.g
if you earn 40k, you might be able to use 35% of your net income to service the mortgage
if you earn 60k, the banks may allow you to use 40%.
 
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