Making your loan application work...

I'm looking for more good ideas (or a critique on what we do).

Whenever we are seeking credit, we go in 'armed to the teeth' . We take in a letter (offering a mortgage, not asking for a loan) with a photo of the property, stats about the area, cashflow projections for the property and the portfolio, income/expense/asset and liability diagrams and tables (with a bolded, large typeface net worth figure down the bottom :) ) and a general piece about our investment strategy and how this particular property fits in.

It's an approach I don't mind crediting to Dolf de Roos, btw.

What do others do to make their loan applications 'killer apps'?
 
Hi quiggles.

While I applaud always aiming for excellence, from everything I've read here (and API), I don't think you have to worry too much about your applications. Sounds like you're doing more than most re your loan applications. Just keep doing what your doing :) .

Regards
Marty
 
Hi Quiggles

That sounds wonderful!

So in the cash flow projections, I presume you include the last two annual Tax Returns including the ATO Assessment Notices, and your Year To Date income figures, verified by the most recent 13 weeks of payslips or a computerised payslip with a YTD figure, plus the last six months statements of all savings accounts and other credit facilities including all credit and store cards?

Your Net Worth make bring tears to the eyes of the assessor, but believe me if you can't demonstrate serviceability the application will still self destruct.

Some lenders would baulk at all that 'investment analysis', while others would really appreciate such a detailed application.

Each application is a delicate thing - full doc, low doc, no doc, the quality of the security, quality and length of employment, whether the earnings income is reliant on the rent or overtime or commissions: Yes, an applicant who prepares themselves well in advance before making the application will certainly win the attention of the lender, but there is a lot more to success than a demonstration of earnestness.

You are obviously well established as a property investor, probably have a high and well established income, and have a proven track record in loan management. There would have to be a very good reason to refuse your application.

For investors making their first application or where the deal is marginal it will depend almost as much on where (which lender) they apply as well as how they apply.

Good luck with Creative Applications 101

Kristine
 
Cashflow projections, slaary and rental incomes are included to demonstrate serviceability. We've more usually hit the equity rather than the serviceability barrier - the latter is at least subject to debate.

And it really helps the relationship manager who's gone in to bat for us on a number of items - I/O on a commercial loan, revaluations within limited periods and others. It just seems a lot more sensible than filling out their forms, which never set out your case as advantageously as you might.

Maybe we ARE weirdos. :)
 
Just as Muz depends on R L to arrange his loans, I depend on the instructions of my mortgage broker/originator. The principal reasons I do this are:

  • he maintains close relationship with lenders and banks;
    provides comparison of available lending products;
    summarises what I need to apply for loans so minimises demands on docs; and
    analyses my financial complexity, serviceability and negotiate on my behalf with the lending source.

I have experienced the danger of trying to shop around on my own with lenders. They take their time to process and their access to my financial records can create doubt to others about me to subsequent potential lenders. When the first application takes up the time, there may not be enough time to seek alternative lender before settlement. I can do without the stress. :eek:

There are plenty of other things to do: manage cashflows, tax issues, structure requirements, general management of RE and investment portfolios and forum surfing? :D
 
Kristine.. said:
Hi Quiggles

Some lenders would baulk at all that 'investment analysis', while others would really appreciate such a detailed application.

Each application is a delicate thing -

Kristine

Yes I have to agree that it seems to be horses for courses.
Last year I submitted what was a detailed summary of my P/L & Bal Sheet to a Hong Kong bank and they told me after that there was too much info. My contact person there said that asians don't want to see such stuff ... they are more secretive and are somewhat turned off by such an open display.
... I was taken aback by the disclosure.
Like to know if others have been told they had too much info, I assume the reverse is not so uncommon.

So I guess we have to somehow fathom the nature of the persons we are dealing with.
e.g. perhaps not too many details for the frontman, but detailed reports for the number crunchers once we're in the door.
Perhaps we should prepare a few different reports and produce the one that suits the relevant person. This is extra work but not so much, obtaining all the data is the big job as is preparing the reports the 1st time. After that we simply lug them into the existing files.
 
Rixter said:
Great minds think alike Muz. The way I look at it is the KISS principle. Why try and reinvent the wheel? :)
Because they're using the wrong wheel, dammit! Over the last 4 years I've skated awfully close to having credit refused on a number of occasion, because I didn't fit the typical profile. We know we're square pegs in the banks' round holes, but they come up empty for excuses usually when we get a little inventive and they want to refuse us.

For us, finance and credit is 40% of wealth creation. 50% is property management (or PM management) and the other 10% is finding the deals. Deals are everywhere.
 
As others have said i just tell my broker what i want to do and he goes into bat for me with the banks until its done. I dont really want to hear from him until then. :D Im only interested in the result, not the process. Lifes too short and theres so much else to do.
 
Thanks Quiggles and Kristine for the information - hope you dont mind but I have copied and pasted it and saved it in my property investment file.

We are also square pegs - my husband and have a boutique recruitment company which is now a year old! We had to x-coll to get our new house but I'd really don't want to do that again. Even to get a business credit card you need 2 years of books for self-employed!

I like your professional approach Quiggles - bet thats part of why you and Mrs Q have done so well.

cheers Sharyn
 
Applying for a loan

Quiggles

I always take:

The last two tax returns
The last two payslips
Spreadsheet showing all properties with the current value and current rent
Statement from Super fund
Copies of Agents summaries proving rents
Copies of rent receipts for those we handle ourselves
Bank Statements showing amount at bank
Any term deposit Statements
Details of proposed new purchase and current rent
and hubby ALAN

We usually get on the spot approval :D

Chris
 
Quiggles,

I'd also do up a contingency/risk management page.

In this I include the following:
Exit strategies - If something goes wrong what will you do to rectify the situation
Current wills
Life Insurance Policies
Income protection policies.

I also provided a one page background letter on myself & my partner listing current employment achievements/time frames/qualifications relating to investments in chronological order.

Ie. 1999 purchased single level 1970's 3 bedroom brick house, beachside mermaid beach for $270K. Fully rennovated house spending approx $100k. Revalued 9months later at $580K. Valued December 2004 by HTW at $950k

Ie - 2002 - Succesfully completed full Real Estae Agents License

2004 - Successfully completed owner builder Course Etc.

Show the bank that you are not like everyone else - that you are committed to you investments and have a good knowledge base.

Hope this helps

BUNDY
 
Fortunately or unfortunately my application tends to end up being about 2" thick (if not nearly 3).

This includes info such as last 2 years financials for the variuos entities, cash flow for all investments etc. as per chrispy's.

The one thing I try not to focus on is our personal (taxable) income as in the scheme of things it has no bearings. Unfortunately witht the banks this is all they can focus on until you draw pretty pictures that illustrate the whole structure.

As far as actually filling in a application, forget it, they just have no relevance as they are written for people who have very limited assets and just as many liabilties.

The last personal credit card I obtained I filled my name and address and then sent it to my 'personal' banker to organise from there again the rest of the application made no sense and sending along 3 inches of documentation was not going to happen.

Furthermore on average my applications are now taking about 6 months to complete. Don't ask me why they just seem to, or at least the last 3 or 4 have. Maybe its because you breach the magis million???

Cheers
 
All very good info, thanks for sharing.

To take it one step further (kind of like a wholistic financing context), how about approaching the 'hard to satisfy' lenders first, exhausting those options, and gradually moving towards the easier to qualify lenders & products (thanks Bill Zheng).

I'm sure most brokers can tell you a rough order that lenders and products would fall into, based on your income, assets, total LVR, DSR etc etc.

Any one have comments or experiences re this?


In the past I havent gone to extensive lenghts in providing doco, the brokers I use have done a fine job in recommending and assessing whats required to get qualified for a loan.

T.
 
Hi all,

This is what a lender looks at…

Who’s borrowing the money?
I.e. ID, Structure, profile

Can they pay it back?
I.e. Serviceability, industry, residential / employ stability, previous form

What’s my security if they don’t?
I.e. % borrowed, locality, security type

If you are lite in any of these three areas you need to mitigate that in your loan application.
 
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