What documents do you need for an application?
If you’re not sure what the bank wants from you… you’re not alone! It can be really confusing trying to work out what you need to give your loan the best chance.
To start off, here a few of the general documents you can expect the bank to ask for. There are basically three categories when you’re applying for a loan: ID, proof of income, proof of liabilities and expenses.
These categories will differ from bank to bank, and depend on the type of transaction you’re undertaking.
Lets unpack those a little more!
Identification seems pretty straight forward right? For the most part yes, you’re right! But you might be surprised how often applications get help up because of it.
To get the points of ID people will usually use their passport, license and birth certificate. Some of the most occurring mistakes are losing these documents and having to purchase new ones, which can take weeks. This means checking if you have all of them available, then checking if there are any errors and that the photo quality is good.
Sometimes if you change your name you might forget to get all those pesky documents updated. So this is your reminder! If you have any documents with two different versions of your name. Whether you’ve migrated and taken another name, changed your last name, or managed to get your nickname on one of these documents, you need to make sure all your ID has the same name. If you’ve changed your name after marriage sometimes you can have the option to link the two documents together. This just proves you’re the same person.
If you’re looking to refinance and you’ve been married since and haven’t changed the name on the title, you may run into trouble. It’s an easy fix though! All you have to do is pay a fee to go through a conveyancer who can walk you through the process of getting it changed.
Proof of Income
Proof of income is a lot simpler than it sounds! Hear us out.
There are two main categories that people fall into here: Employed through an employer or self employed.
Employed through an employer
the most common document the bank will need from you here is your pay slip. Your pay slip will probably come in a unique form, but it doesn’t really matter as long as it ticks a few crucial boxes. First, it needs to have your employers name and ABN. Second, the dates the pay slip covers. Third, your name. Fourth, year-to-date figures, which show how much you’ve earned from the start of the financial year. The bank really just wants to see that your pay is consistent of a period of time.
If you’re casual of part time this is more important. They want to know what your minimum is, with a break down of bonuses, overtime, etc. Another small detail. If your pay slips are handwritten the bank will probably want to see a group certificate and employment contract as well. Just to make the documents more official and show you are actually getting the income.
If you’re employment contract isn’t exactly “standard”. Contact your mortgage broker so they can make sure you’re putting your best foot forward. We want to make sure all that overtime, pay raises and bonuses are all taken into account when you’re applying for a loan.
What happens if you’re on maternity leave?
Your income on maternity leave probably doesn’t reflect your earning capacity. But that’s ok! You may still want to build your investment portfolio or upgrade your home when you’re on maternity leave. These applications will be assessed on more of a case-by-case basis. Some banks are great at handling clients who are on maternity leave or planning to. So a simple letter from your employer about your return to work date, hours and income can definitely help!
How do you verify your income from investments?
If you’ve taken your financial future into your own hands what do you do with that income? Well… any income from your rental properties or other investments can be taken into consideration. The bank just needs proof of this amazing income. Statements from your property manager confirming rent or Centerlink statements for any income amounts can help verify all these details. If you have any extra income streams talk to your mortgage broker about any extra documentation you might need.
This category not only applies to business owners! It can also apply to independent contractors who trade through an ABN.
The simplest way to verify your income is to have copies of your tax return. You might also like to have are notices of assessment and bank statements to show your trading income. You’ve also got handy documents like profit and loss statement and balance sheets that can give the bank the whole picture.
The bank will accept one year, but you will need to show that you’ve been ABN registered for at least two years. This doesn’t mean you’re restricted. You can work out an average if you’ve had a rough year. But there are still a lot of different outcomes and opportunities here so if you have any questions contact your broker.
Sometimes you don’t have all your finances prepared on time. It happens! We understand, and so does the bank. Here you can look at getting a low-doc loan. The requirements really differ from bank to bank, but generally the more information the better. It’s important to put your best foot forward and present what you can to prove your income.
Proof of Liabilities
We’ve all got liabilities in our lives. Here’s what the bank wants to know about yours… everything.
The banks are looking for proof of all the liabilities you have. Some of your current liabilities might be things like credit cards, car loans, leases and any other loans you might have. This includes bank statements for credit cards you don’t use. Before you submit your application we suggest you for a credit health check and make sure you’re not holding onto accounts you don’t need or have forgotten about. Today banks are really focusing on credit history when you’re applying for a loan. So make sure you settle those Afterpay debts and payday loans. It could mean the difference between a successful pre-approval.
Do you need to disclose your living expenses?
If you’ve applied for loans in the past you might be wondering why this is such a big category now. Well you’re not alone. This is a pretty new consideration by banks, but it’s quickly becoming the difference in gaining a successful loan application. When you apply now, you’ll be expected to provide a list of everyday living expenses. This can be really overwhelming, but it’s a process that’s here to stay. Each bank might vary, but a few you’ll definitely need are groceries, entertainment, holidays, transport (including ubers, train, fuel, car servicing etc.) and other common living expenses.
Any transactions that can be categorised as living expenses will be considered by the bank and reflect on your ability to pay the loan. This is a really in depth process. But it can be a good thing! If you know you’re going to go through a loan application process it’s a chance for you to review your own finances.
You can purchase property at any time in your adult life. But if you’re looking to get a loan or refinance over the age of 40, the bank will want a little more information than usual when you’re applying for a loan. Because loan terms are so long they just want to make sure you have a plan B. The exit strategy lets them know what you’re plan is to pay the loan when you retire.
This could be anything from more frequent repayments, potential assets that can be sold and anything else your broker can think of. There are quite a few strategies you can employ here to get you over the line.
Applying for a loan is becoming more and more complicated, but that’s not necessarily a bad thing! If you want help navigating all the demands and information that’s out there contact your Rise High mortgage broker here, learn more about your home loan or investment loan, or leave your details below!