Is being a contractor really a problem?

[poppy]

Is being a contractor (IT) really a problem for a major lender?

I have several loans already with a big bank. Perhaps up until now they have not realised I am a contractor - I haven't tried to mislead them, but I'm not going to put HEY I'M A CONTRACTOR on my loan application. They are taking a long time to "verify my employment" this time and I'm wondering if they have figured it out, and it might be a problem.

I do have quite a lot of industry experience, if that would matter to the bank, and therefore not likely to be unemployed for long in the near future. Also I have a husband with a steady job (but not earning enough to service loans on his own).

Thanks

 

[geoffw]

The last time it was a problem for me was in about 1991- when I was trying to buy my PPOR.

Banks are often looking at 2 years+ self employed income (3+ for some banks). As long as you have that minimum, it should not be a problem.

As you are in Canberra, if you are having problems, I'd suggest that you see Ed Nixon (www.loansapproved.com.au - a member of this forum) - he is well attuned to what investors need.

If your bank is slow, it may be because you have hit a ceiling somewhere- over a servicibility or loan exposure ceiling. That's what happened to me.

 

[ruroshin]

Hi, first time posting here after finding this great forum a month ago.

I'm also an IT contractor and just refinanced two of my mortgages with a major lender. I worked for close to 7 years for the government and decided to go contracting late last year so I only had 4 months with the new contracting job.

The bank wanted the latest 2 pay slips from the new job, a letter of employment stating my expected annual income from my recruitment agency, a letter of employment at my place of assignment and my last 2 years tax return as they considered me as self employed. This took a really long time so half way through I decided to go to a mortgage broker instead and have him submit my application to the lender. The application with the MB actually went through faster and got further than the application I submitted through the same lender.

My application has now been approved btw and just waiting for the settlement

 

[willy1111]

Most lenders shouldn't have a problem if you are on a 1 yr Contract - 6mths might be ok.

But anything less would be a bit trickier - I guess they would take into consideration past employment, and strength of the deal.

 

[Mr Ed]

Poppy,

Sometimes it is a challenge, other times it isn't. It depends how long you have been a contractor and what LVR you are asking the bank for. 2 years as a contractor and 80% no sweat.

6 months and 95% a challenge

Westpac are a good lender with contractors is the answer I think you might be looking for.

All the best.

 

[poppy]

Hi Mr Ed,

Thanks, I'm actually with the ANZ. It's an 80% loan, less than 1 year contracting but many years working in the industry.

I'm still waiting to hear about the loan.

Seems silly that banks can't see the difference between an IT contractor and someone running their own business.

 

[Qlds007]

I arranged ruroshin's loan application and that was a 95% lend with 4 months contract work.

 

[Mr Ed]

Poppy,

That should fly through. Ask the broiker how the servicing model was. Was it lean or was there and abundance?

If you went direct, rattle their cage, ask them *when* will you know if the appln is apprv'd.

Tell them your train is moving and you have no tollerance for tardyness

 

[ruroshin]

Poppy

Richard Taylor (Qlds007) arranged the application for me with ANZ so I highly recommend him.

 

[Medine]

Hi Poppy,

Sometimes a delay with the bank is caused by a straight forward scenario (like yours) being given to an inexperienced loans assessor. This week I had a very similar one to yours approved with ANZ, so there's no change to their policy, and I'm sure the delay is nothing to do with your contracting.

A gentle nudge should get things moving again. I often think that you catch more flies with honey than with vinegar!

Cheers, Medine

 

[poppy]

The loan's now been approved

Still not sure what the problem was; not servicability.

In the future I'll know that pre-approvals don't really mean much as they don't seem to do all the checks until later in the process.