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Government plans to give banks the ability to collect credit reports and a full credit profile of  mortgage credit  applicants before you get your mortgage

The banks have been taking a beating lately. After all they have been lending “irresponsibly” over the last few years, and the Government has has the tie down solution: new responsible lending requirements placed on the banks, and due to come into effect from January 2011.

Banks remedy is a bitter pill for most of us. They want to have a full financial credit profile of everyone so that they can ensure you can afford the mortgage loan [or any other credit] that you are taking on.

In case you are thinking that this is happening already, think again.

When you currently apply for credit of any kind, including a home loan, you sign a privacy Act statement that authorises the mortgage or other credit provider to access your credit reports and discuss your credit with other lenders.

They essentially only get access to all defaults, all utility account transactions. For instance, phone bills that you or your partner, or even ex partner have not paid can be a deal breaker and unpaid judgements against you. they also get a handle on how many credit enquiries you have made over a 90 day period. That can also be a deal breaker when it comes to getting finance approved. That is, banks just need the bad stuff on you to decide if you a good credit bet. And only when you apply for credit. Now a default is considered only after 60 days of unpaid bills.

But the banks new model is to view every aspect of your finance and credit affairs, including accounts with other institutions, relationships with utility companies, when accounts are opened and closed, and, crucially, the repayment history of all accounts going back two years [currently this can be as low as 6 months to 12 months].

Can you spot the change? They now want all the credit stuff on you, the bad and the good, and will be able to credit profile you.

And the time lapse will shrink, so conducting a credit account can have a worse outcome that some of us would like.

The banks view is that by knowing more about you, will give then a better ability to ensure you are able to repay your bills and credit when due. This could be based on your payment cycle, so 30 days may be the number that is settled on.

The Australian Government believes that the proposals are in the consumers’ best long term interests because the current system allows only bad information to be considered.

Will new credit responsibility laws put a lid on house prices?

Will this affect house prices? It could well dampen demand for housing, based on the fact that many people are in my view over committing on their mortgage credit, and if this happens we could see home prices flattening, just as the decade of relaxed credit we have experienced has increased demand. It seems that the days of easy credit for home loan finance are numbered.

Author: Rick Adlam, Mr Mortgage

Mortgage loan application mistakes, and how to avoid them

I wrote an article about  the mistakes I see home buyers and homeowners making that get their loans declined at  Mr Mortgage I thought that I should write the article here also as an article.

This blog gives to a summary of the article which you can find here.

Lenders cannot accept these types of mistakes below, and are likely to decline the loan application, if not ask for a revision. The mistakes include the following.

1. There are too many credit enquiry notations on your credit file.

2. Your home loan submission is poorly written.

3. Your proposed home is appraised as less than the purchase price agreed.

4. Your Lender says you have insufficient savings, deposit or income.

5. You have changed jobs, or employment status recently.

6. You have no savings history or irregular savings patterns.

7. You or your partner have a bad credit rating or history.

8. The home of your dreams is undesirable in the eyes of the Mortgage Lender.

By using the methods found in the article you will get your loan approved quicker and with less hassles.

You find the full loan application mistakes and how to avoid them here.

Source: Mr Mortgage

New Australian wide consumer protection laws protect home buyers and mean that real estate agents and homeowners must now disclose a home’s baggage, including if anyone has been murdered in the home for sale.

No home buyer wants to own a home where there has been foul play, and a home buyers right to know a home’s history will be backed with million dollar fines on real estate agents [and I presume homeowners who sell a home themselves] for non-disclosure.

The Australian Competition and Consumer Commission recently gained power to fine agents up to $1.1 million for misleading their customers. [In real estate parlance, a client is the vendor not the buyer. The home buyer is the customer. the distinction comes on the basis of who hires and pays the Agent is the client, and normally this is the vendor.]

Real estate agents must now disclose to potential home buyers other things that would effect the quiet enjoyment of the property including:

1. A noisy or malicious neighbour is the last thing that a home buyer wants to inherit.
2. A barking dog can be a nuisance that drives people to distraction.
3. Homes in flight paths, near railways, backing onto garbage depots and other noise polluters.

The fact is that these things may be the very reason that the homeowner wishes to sell, and it means that the home has a lower value to the owner. That may have to be factored into the price.

Neighbours that play loud music at odd hours are the last type of people that property buyers who work long hours want to live near.
All these instances would attract fines, and may be recourse to reverse the sale of the property.
The changes came into effect on July 1 when the ACCC merged existing State fair trading laws into a federal consumer protection law.

If you are a home buyer viewing properties, make a point of asking the real estate salesperson their understanding of the law and how they will be helping you make an informed decision in buying property.

Author: Rick Adlam, Mr Mortgage