Since the Global Financial Crisis there has been a gradual tightening of credit policy. This has been particularly evident in the case of low doc loans. It has been especially noticeable with the major banks. We are often receive a call where the customer is with a particular lender, they have gone to get a top up or change their existing loan and are now subject to the bank’s new lending criteria. A prime example is where the loan was written as a Low Doc Loan a few years ago, and when a top up is requested, the bank is now requiring BAS statements.
Some Low Doc Loans that were written a year ago, or even six months ago are just not able to be written today.
As well as tightening of credit policy, mortgage insurers such as GE and QBE have also tightened and to top it off some of the major banks are now credit scoring.
So what is the answer? The general rule is your first shot is your best shot. Make sure you are aware of what most lenders are requiring. As a guide, minimum two years ABN, registered for gst, clean credit, purpose of the extra funds outlined, and good repayment history. Be aware also, that once a loan has been to a lender and it has been knocked back, it may be harder to get it approved the second time around with a different lender due to credit scoring.
In summary, even though credit for low doc loans is more difficult, low doc loans that satisfy the above criteria do have more chance of being approved. Now, more than ever, it pays to get it right the first time.