To lenders, Mr (or Ms) Perfect is not someone who enjoys sunsets and long walks on the beach. They are someone who is reliable, well-educated, market savvy and focused. They are someone who knows that buying in property is not a spontaneous decision, but a long-term business investment.
In case you were wondering if you’ve got what it takes to woo the banks into approving your home loan, here are a few of the qualities most will always look for in an applicant.
If you’ve ever entered into a mobile phone plan, taken out a personal loan, or owned a credit card, you will now have a credit file that lenders will scrutinise when deciding whether or not to approve your loan.
Defaults on loans, overdue or missed payments, and other kinds of black marks on your credit file will all count against you when applying for any type of loan. Mr Perfect has no black marks whatsoever on his credit file.
Additionally, lenders love investors and loan applicants who are financially independent - meaning they have their own stable source of income, and don’t rely on loans from other people to sustain themselves - and who have a good savings history. To them, Mr Perfect is someone who can be counted upon to pay back the money they lend them.
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Generally, it’s not enough to demonstrate that you are good with money to persuade a bank to lend to you. You need to be able to prove that you have good character, as well as a good credit history. Simply being a ‘nice guy’ isn’t going to cut it.
Mr Perfect has a strong, consistent employment history. Someone who has worked for the same company for 20 years is seen as being less of a financial risk than someone who has consistently had trouble holding down a job. A strong employment history also further demonstrates reliability.
Lenders also often look at an applicant’s living situation. Living independently in a good-sized apartment in a reputable location, or being married with two kids and living in a spacious home in the suburbs, will likely reflect better on you than if you lived in a share home with five friends, or still lived at home with your parents and didn’t pay any rent money.
Importantly, they’ll want to clarify that an applicant has no criminal history. This is a big one. Some lenders may reject your application before even meeting with you, just by seeing that you’ve got a criminal record.
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While the high school you went to probably won’t matter much to the bank, your overall education will. Mr Perfect will be intelligent and well-read, however banks will want more than book smarts. They will look for someone who has done their research, and has come to the table informed about what exactly they’re hoping to get out of their bank and their loan.
Researching different kinds of loans, investigating the rates and policies of all different banks before deciding on a specific one, and staying on top of (but not being obsessive about) current market trends will show a lender you’re serious about becoming an investor. Walking into a meeting with a lender you’ve chosen at random, with no knowledge of what you’re really doing there or what their policies are, won’t do you any favours.
Additionally, lenders will love a hopeful investor who has thoroughly researched exactly what kind of property they want to invest in, where that property is, and why it will be a good investment for them. Having a long-term plan in mind for your property investment will show you’ve seriously considered it, including the potential risks involved, and didn’t just wake up one morning and decide to throw money at a house because everyone else was doing it.
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While we’re on the topic of having a long-term plan in mind, lenders will love a hopeful investor who has the patience to see that long-term plan realised. Seeing a return on your investment will take time - years, even. Lenders won’t want to give money to someone who gives up on their investment after the first year because things aren’t moving along as quickly as they’d hoped.
Mr Perfect will set goals for himself. He will know how much he wants to get out of his investment, and the deadlines he wants to have achieved this by. He will remain focused on these, and won’t be put off by fluctuations on the market or by what everyone else is doing.
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