Home loan applicants have been warned: in a post-banking Royal Commission era, borrowers’ bank statements will be looked at more closely than ever.
They’re looking at everything from your Uber Eats habit to your gambling habit. And if they don’t like what they see, your home loan application won’t pass muster, warned Finder money expert Bessie Hassan.
“There have been many bizarre reasons for home loan applications being rejected as lenders tighten their requirements in the wake of the royal commission,” she told Yahoo Finance.
Related story: How to talk your way to a cheaper home loan with your bank
“From spending too much money on takeaway, to taking cash out at an RSL implying a gambling problem, we’re seeing heightened scrutiny of applications.”
Banks are under pressure to establish that a borrower can afford the home loan repayments as well as a buffer to allow room for interest rate increases, Canstar financial services group executive Steve Mickenbecker told Yahoo Finance.
“They do this by checking income sources, through pay slips, as well as spending habits, through bank statements and by asking the applicant about their spending.”
So, before you apply for that home loan, here’s a heads up on some of the things lenders will be keeping an eye out for.
Food, subscriptions, and online shopping
According to Hassan, the Bank of Melbourne had increased the number of spending categories under assessment from six to 13 which included streaming subscriptions, groceries, clothing, and insurance, Hassan said.
According to a recent survey by Canstar, borrowers said they had been asked questions to do with food, Afterpay, and even their children.
One respondent said they were asked: “How often do you eat takeaway food?”, while another was queried, “Why do you get take away food?” or to “identify transactions on statements that were for food”.
Other respondents reported being asked to provide their Afterpay statements.
Many were asked to justify some of their purchases, with one respondent asked “why I purchased certain items”, while another said they were queried about “the specifics of some of our expenditure”.
Yet another respondent was asked about how their second or subsequent children would affect their borrowing capacity.
Mickenbecker told Yahoo Finance such questions were asked to determine what kind of spender you were.
Related story: These are Australia’s 10 best home loan lenders
Related story: Are you behind on your mortgage? Here’s what you need to do
For example, frequent use of buy now, pay later platforms could potentially indicate you spend beyond your means.
“Have you tied up too much in subscriptions for phones, internet, spotify, etc to free up room in the budget for loan repayments? Have you become too hooked on fast food delivery to tighten the belt?
“Banks understand the difference between discretionary spending and essentials,” he said.
“However there are some people for whom discretionary spending has become habitual, and the bank is trying to identify this in the application process.”
Tips to improve your home loan application
So how do you get that tick of approval from the bank or lender?
According to Mickenbecker, here are some quick tips to increase the chances of having your home loan approved:
Clear your credit card debts, buy-now-pay-later debts and other small debts – and then stay debt-free;
Stay away from gambling, buy-now-pay-later, and food deliveries;
Set up an automatic transfer from your everyday account into a savings account to show you’re disciplined and can afford repayments – and don’t touch the savings;
Pay all your bills on time (this will help your credit score, too); and
Check your credit score. Are there disputed items on your record? Clear them by talking to the biller. If there are genuine defaults, you might be able to prove to your lender you’re a changed person by being responsible from now on.
Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, news and tech news.