Typically when you make a loan application, the lender will ask to see at least three months of your bank statements (sometimes more).
The request may seem inconvenient but the financier has good reason to want to review your bank statements. It is called due diligence. They need to verify that you are really capable of servicing the loan and that you conduct your financial affairs in a manner that indicates you are not likely to get into hot water. So what is it that they look for exactly?
Here’s a few red flags that will prompt the lender to seek more information from you.
- Regular dishonours or unauthorised over drawings are a sure sign to the lender that you may be struggling with cash flow already.
- Regular direct debits that indicate loan repayments that have not been declared in your application. In today’s environment there should be no surprises here as most loans will be picked up in credit reporting. However the statements may display regular payments that could reveal private arrangements
- Unusually large fluctuations in the balance of the account. A large deposit that is not in keeping with the historical activity of the account could indicate that you have sourced funds to make your deposit on a home or to improve your balance sheet. Borrowing extra money won’t necessarily disqualify you from qualifying for the loan provided that you declare that borrowing in the loan application.
With these facts in mind, it may be a good idea to go over your bank statements prior to making a loan application to be sure of all your payments and ensure that you declare all of them in your loan application. Its best to dot every i and cross every t – the last thing you want to inadvertently do is to appear dishonest to the lender – particularly in today’s climate where bank lending standards have tightened considerably compared to a few years ago.
If you would like assistance with your mortgage application please contact Australian Finance Hub to discuss your requirements.