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Six red flags that could see your loan denied

6 red flags revealed: Source: REUTERS
6 red flags revealed: Source: REUTERS (Jorge Silva / reuters)

The Australian property market is booming higher as buyers race to get in, but if you’re looking to get your loan approved, you’ll need to make sure you don’t make any mistakes.

Getting your own numbers wrong is a classic mistake that could see your loan application denied, but according to the Adelaide lender tic:toc’s chief customer officer Faith Brockhoff, there are several other common red flags buyers need to be aware of.

She spoke to Yahoo Finance about some of the most surprising ones to watch out for.

1. Sitting on community boards

“Credit agencies don’t immediately distinguish between holding board positions on for-profit companies and those on small local not-for-profits. If you’re community-minded and sit on a lot of local boards, a flag might appear on your credit history,” Brockhoff said.

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You can get around this potential problem by getting a letter from the accountant or treasurer of these groups detailing whether there is any financial liability attached to those positions.

2. Getting married, obtaining a doctorate or holding public office

So you became a doctor, congratulations!

Now, make sure that doesn’t mean you can’t buy a house.

“[Marriage, public office and obtaining a doctorate] are all instances where one's name or salutation (like Dr, Ms or Councillor) might change. For credit agencies that means a duplicate or cross-referenced credit profile might be generated for you,” Brockhoff said.

“Having more than one credit profile linked to a person can be a sign of identity theft, so this can raise a flag that requires assessors to look more closely at an application.”

3. Buying in an area you don’t live

If you’re moving far outside of your current place of residence, that will also raise some lenders’ eyebrows.

As Brockhoff explained, lenders want to know that you have local connections and knowledge of the area you’re buying in.

Lenders want to know that you have local knowledge and connections to the area you’re planning to purchase in.

“For example, if you’re looking for a property in Perth but your credit history says you’ve always lived in Sydney or Melbourne this will throw up some questions for lenders. For investment loans, they’ll want to understand how and why you chose the area.”

4. Making multiple applications

Prospective buyers also need to take care not to accidentally make more than one application, as having multiple credit applications on your file can trigger alarm bells for lenders.

“The best approach is to make a decision about which lender you want to apply with and make one application only.”

5. Moving house a lot

If you’ve lived in several parts of Australia, you might accrue an unwanted label: “Address instability.”

The problem with this marker is that lenders want to know if you’ve had a stable life, and regular moves will draw unwanted attention to your file.

“Of course, renters frequently have to move if the property they inhabit is sold, so this will require a frank discussion with your broker or lender,” Brockhoff added.

6. Getting your own numbers wrong

So the rental application wants to know how much you earn: don’t round it up.

Small changes to financial details like this can cause problems because it shows up as a discrepancy compared to your credit report.

“The same applies to loan balances and credit card limits. Put in exact numbers for all of these for an easier ride. The same applies to household expenses - typically people under-estimate these. Rather than pulling a figure out of the air, go back through your records and add these up,” Brockhoff said.

What about Netflix and Uber Eats? I’ve heard they can be red flags

The good news is that most lenders generally don’t discriminate between spending on groceries and spending on meal delivery apps.

So as long as it’s clear you’re living within your means, you understand how to budget and you have enough to make repayments, a big Uber Eats habit shouldn’t cause a problem.

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