getting a loan while in between jobs

[JameZ]

Friend of mine is about to take a significant pay cut and change jobs.
If he wants to buy a property now, how will it work from a finance perspective?

If he has told work he is quitting in a months time, does he still have time to buy a place now, and get his loan approved under his current income?

 

[Peter_Tersteeg]

Technically speaking he can provide a payslip or two from his current job, get a pre-approval which would be good for 90 days and have that time frame to purchase a property. A couple of things to pray for...

1. Pray the lender doesn't perform an employment check at any point. This would quickly reveal your friends resignation and the application would be declined or pre-approval withdrawn.

2. Pray the lender doesn't decide to reassess at any point in the process. There's plenty of reasons they could decide to do this, especially if it's a high LVR or a tight servicing application to begin with.

3. Pray your friend can afford the loan even on a reduced income. Defaulting to the point of loosing the property can ruin your life.

The third point kind of suggests that it would be a very bad financial decision to purchase under any circumstances where there's a reasonable chance you'll later default. It's not to your advantage to buy a property you can't afford. There's plenty of lenders that will accept borrowers who only recently started a job, so there's really no good reason to manipulate the system in this way.

 

[Redom]

Friend of mine is about to take a significant pay cut and change jobs.
If he wants to buy a property now, how will it work from a finance perspective?

If he has told work he is quitting in a months time, does he still have time to buy a place now, and get his loan approved under his current income?

Hmm adding to it, technically speaking, any known future known changes to income should be disclosed in the loan app.

Moving beyond that, Peter's mentioned three great reasons to tread with caution.

Cheers,
Redom

 

[albanga]

It was my understanding that a broker/lender must ask the question "Do you believe your financial situation will change in the near future". If the borrower does disclose this and as per the question then they simply under the NCCP (I think that's the one) cannot proceed with the loan application.

Now it's at the discretion of the borrower to disclose this, but if asked and they choose not to and then default they are in a world of trouble.

 

[Paul@PFI]

I'm with Albanga on this. I was recently asked this question and when I asked what they meant they said - Change jobs with lesser income, quit working, terminal illness etc.

 

[Peter_Tersteeg]

It was my understanding that a broker/lender must ask the question "Do you believe your financial situation will change in the near future". If the borrower does disclose this and as per the question then they simply under the NCCP (I think that's the one) cannot proceed with the loan application.

Now it's at the discretion of the borrower to disclose this, but if asked and they choose not to and then default they are in a world of trouble.

If the wife is pregnant but everything is still affordable with an extra dependant and only the husbands income, there's no reason the loan shouldn't be approved. Technically though your financial circumstances are about to change so you have to acknowledge this when asked. With the electronic systems used to assess applications, the loan will be immediately declined.

It will then take an enormous amount of effort to get the loan approved, causing delays at best. More often than not, acknowledging that financial circumstances are about to decline will mean the loan is not approved and no amount of effort will change this.

Instead, we tick the box that says 'no' when asked and then we add some comments about the changes. It's been disclosed but we're not leaving it to a computer to assess this aspect of the application.

Completely unrelated to this, I've made observations that many assessors don't pay a lot of attention to the notes.

 

[JameZ]

If the wife is pregnant but everything is still affordable with an extra dependant and only the husbands income, there's no reason the loan shouldn't be approved. Technically though your financial circumstances are about to change so you have to acknowledge this when asked. With the electronic systems used to assess applications, the loan will be immediately declined.

It will then take an enormous amount of effort to get the loan approved, causing delays at best. More often than not, acknowledging that financial circumstances are about to decline will mean the loan is not approved and no amount of effort will change this.

Instead, we tick the box that says 'no' when asked and then we add some comments about the changes. It's been disclosed but we're not leaving it to a computer to assess this aspect of the application.

Completely unrelated to this, I've made observations that many assessors don't pay a lot of attention to the notes.

That is a great tip I will share with my friend, thanks Peter

 

[albanga]

Thanks for the tip Peter.
Might have to buy you a beer or two if I make it on Tuesday night for all the valuable information you have given me over the past year!

 

[Jamie M]

Thanks for the tip Peter.
Might have to buy you a beer or two if I make it on Tuesday night for all the valuable information you have given me over the past year!

Might have to make it a lemon lime bitters for our teetotaler friend.

Cheers

Jamie

 

[tomlemke]

That is a great tip I will share with my friend, thanks Peter

I've had a few close encounters, with ip2 bank did the employment check a week before settlement a week later i lost my job!