Some Farmer does Finance FAQ’s
With my role as a Finance Broker also being one of an Educator, I encourage questions from my customers to seek clarity and ensure understanding. Our discussions are based around providing you with the knowledge to make informed decisions. Like I always say … there is no such thing and a silly question, only a silly answer!
Here’s a small selection of questions that are often raised …
What type of finance can you arrange?
I can write most types of finance from Home Loans, Property Loans, Commercial Equipment and Machinery, Asset Finance such as truck loans, car loans, motorbike loans, caravan loans and so much more. Whether you are looking for finance for your business or for your personal use why not give me a call. Even if it is not something I have done before then I will research it for you. If I can’t help then I will endeavour to find out who can.
What areas do you service?
With the latest technology providing various online avenues such as video calls, cloud platforms and secure IT services, there are so many ways we can connect. I can offer my service Australia wide!!!
What is the process in applying for a loan?
When you are ready to go ahead and apply for finance, I will guide you through the process. Depending on your application type, what you are looking to finance, and also whether you are ready to buy or would like a pre-approval, the process can vary slightly.
These steps are general in nature and are a basic outline of some of the main stages of a loan:
1. Application Stage
When you are ready to apply, I will obtain your full application along with any supporting documents and ID verification as required. There are a few ways we can go about this (eg: phone, in person, via an online portal and Zoom meetings).
2. Application Assessment
After receiving all your application details and documents, I will then complete my assessment and research your application. If necessary, I will come back to you with my recommendations for your consideration. Once I know which avenue is suited to your situation, I will then issue you any lender specific documents for your attention in readiness to submit your application.
3. Loan Submission
I will then submit your application to the lender and let you know how long the lenders’ process and turnaround times are.
4. Conditional Approval
This is when the lender approves your application subject to some conditions which may require more supporting documents from you. I will pass on the details to you and then once the additional information has been provided, I will re-submit to the lender for approval and let you know of the turnaround time.
5. Pre-Approval
This is when the lender approves your application subject to the proposed security being acceptable. This means the lender has ticked off on all the details we know and is subject to all of the details we are yet to know based around your purchase, for the purpose of going shopping with confidence. For example, subject to the car or house you choose to purchase being acceptable security and having the relevant valuation or inspections completed to verify all relevant and identifying details. There are generally a few other standard conditions, though the lender will provide a list of what is required to be sufficed prior to issuing a formal approval.
6. Valuation or Inspection
Once a Conditional Approval or Pre-Approval has been obtained, the lender will request a valuation report or inspection report to assess the security acceptability and tick off the remaining conditions.
7. Formal Approval
This is when the outstanding items remaining have been sufficed and the lender has approved your loan!!! Documents will now be issued to you.
8. Settlement
Once the lender has received your signed documents, and checked they are all in order, they will settle your loan and distribute the funds accordingly.
9. Post Settlement
I will complete loan check-ups with you to ensure your payments have commenced as planned and provide annual reviews.
What details do I need to provide when applying for a loan?
Lots!!! Hahaha.
Jokes aside, sometimes there can be a fair bit of detail I require as your Finance Broker, though it is all for good reason and purpose I can assure you. The amount and type of information I request can vary from person to person depending on your circumstances and what you are looking to achieve.
Depending on the type of finance enquiry and loan purpose, you will most likely require the following details:
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- Your personal details
- 100 points of ID
- Minimum 3 years address history
- Minimum 3 years employment history
- Documents to evidence your income
- A detailed list of expenses
- Your Assets and Liabilities
- Statements for any financial liabilities
Sometimes I may ask for more than this, though it is very much dependent on your situation as to what additional details are needed to complete my assessment, and to help illustrate your story to the Lender. When you engaged me as your Finance Broker, part of my role is to gain a thorough understanding of your circumstances so I can then go to work on your behalf and put your case clearly to the Lender.
How come you ask for more than XYZ did?
I have quite a large panel of lenders, all of which ask for varying information. So, to be prepared to submit your application to any one of these lenders, I must first request any information and documents upfront that I foresee all of these lenders needing.
This is derived around what regulatory and lender guidelines are applicable. You see, depending on the type of finance you are applying for, the regulatory guidelines will differ (for example there are different guidelines for Consumer lending to Commercial lending). Even where you are applying for finance and who you are applying for finance with could all vary what information you are asked for.
So, depending on whether you go direct to the Lender, or the Dealership, or an Asset Finance Broker, or a Finance Broker that writes both Mortgages and Consumer Asset Finance, and so on, the regulatory guidelines in place could be varied too and in turn what details you are requested to provide will also vary.
Unfortunately, there is not one standard across the entire industry at present, which I understand can certainly make it frustrating.
Fortunately, you can have comfort in knowing that the quantity and type of information I request is because I can offer you a choice of lenders, and because I conduct a thorough assessment of your application to ensure I am placing your loan with the lender and loan to suit your situation, requirements, and objectives. Rest assured that I will endeavour to make the process as smooth and transparent as possible.
What is a credit check?
I often get asked this when I explain that a credit check is part of my process. A credit check, also known as a credit enquiry, is when a Credit Report is generated from your Credit File. Depending on how your file is accessed, and whether it is a soft hit or a hard hit, will vary if it affects your credit score and who can see the enquiry.
For example, when I access your Credit File it is as an Authorised Access Seeker which does not affect your credit score and the lenders can’t see the enquiry. When your application is submitted to a lender, they will generally perform a hard hit which affects your credit score and leaves an enquiry visible by other lenders and credit providers. Your permission is required for both of these to be performed, and most lenders will conduct a credit check as part of their assessment.
In all honesty, I would prefer to be asked “do you perform a credit check” as it would mean that the word is spreading around the importance of your Credit File. Too often I hear of situations where applications have been submitted on behalf of the applicant to lenders without a credit check being completed. As most lenders will conduct a credit check, this can lead to unnecessary declines if there are details in your Credit Report which do not meet the lender’s guidelines. Completing a credit check prior to submission forms a valuable and integral part of my assessment process as your Finance Broker, to undertake due diligence and protect your Credit File.
Is it okay for me to apply with multiple lenders simultaneously to see if I can get a better deal?
When you apply for finance, most lenders will conduct a credit check on your credit file. It is important to note that enquiries on your credit file affect your credit score. Enquiries can also affect the lender’s decision too, especially if they see multiple enquiries within a short period of time. Some lenders in the mortgage space may also decline an application if there has been a very recent enquiry for the same purpose, depending on their Credit Scoring Tool. As your Finance Broker, I will do the shopping around for you.
If I have an application in with another lender then can I also apply with you?
Depending on the circumstances, I will refer you back to the lender you have your current application with. If I was to proceed with an application it could affect your current application so although I would love your business, I would prefer to do the right thing by you. However, it would be a different story if you were declined elsewhere or withdrew your application and decided to engage my services.
Can I get a Home Loan with no deposit?
Generally, the lenders would prefer to lend up to 80% of the purchase price or valuation amount, however there are lenders that will lend up to 95%. This percentage is called the LVR or Lend to Value Ratio, and with the higher LVR comes the potential for greater risk, and varying lending guidelines which may reduce your options. Typically, Lenders Mortgage Insurance (LMI) is payable by the borrower when borrowing over 80% LVR, and the premium increases in line with the associated risk. LMI does not cover the borrower, it covers the Lender. So, by having up to 20% deposit you can reduce or eliminate the additional cost of LMI, and maximise your options. When borrowing over 80% and up to 95% LVR, you will need to factor in the LMI cost as well as your deposit (in addition to all other associated purchase costs of course). A home loan with as little as 5% deposit of the purchase price can be achieved.
There are ways of borrowing without Deposit, though this will generally require additional security. Ways this can be achieved is through a Family Pledge, Guarantor or Equity. All these options would require an additional property as security to achieve an LVR of 80% across both securities.
Check out the Family Pledge Fact Sheet for more details.
How long will the process take?
As the saying goes … how long is a piece of string?
It depends on the type of finance you are applying for, the lender timeframes, and the duration it takes to supply me with your information and supporting documents. The quicker that you can get me the details I need the quicker I will be able to get underway.
Depending on the type of finance and complexity of your application, it may take from 1-5 business days until your application is ready to submit. It could be less time and it could be more time, though either way I will keep you updated along the way with my progress and expectations.
I generally know before submitting your application how long the lender is currently taking to make a decision on applications as this forms part of my assessment, so I will relay this to you. This timeframe could be anywhere from within 24 hours, to up to a week, and in some cases weeks for some home loans.
It all comes down to the type of finance you are applying for, and the lender your application is submitted with.
Once your application has been decided, it will then depend on the decision. For example, if your application is Formally Approved then Loan documents will generally be issued promptly. If your application is Conditionally Approved, then it generally takes 24-48 hours to be picked up again once the outstanding documents have been received by the lender. A Pre-Approval will also generally take 24-48 hours to be picked up out of the queue once the sale order/contract of sale has been received by the lender.
Vehicle Inspections and Valuations can take from 48 hours or up to a week turnaround respectively, depending on the location of the asset or property. Once the Valuation or Inspection Report is received by the Lender, it may take 24-48 hours before it is picked up out of the queue and reviewed.
Hence why to me, keeping you updated is more important than knowing the timeframe of the process. Given there are so many variables at play, it can be unrealistic to provide a set timeframe. However, regularly updating you with the progress of your application helps eliminate the worry of where your application is at and manages expectations.
What are the costs involved in using a Broker?
I bet you are now starting to see a common theme, am I right? The answer to this one, you guessed it, also depends on the Lender.
I will generally charge a Broker Service Fee, which will vary depending on if/how the Lender pays me.
I don’t receive commission or payment from some Lenders, so in these instances my Broker service Fee will be higher. The good news is that I will communicate and explain this to you upfront so you can make an informed decision.
How much can I borrow?
Now this one depends on your circumstances … and the Lender!
You could take a look at the various calculators on the world wide web, or even the ones on my website, however these are just a guide based on a bunch of assumptions. You see, depending on your personal circumstances and what you are looking to finance, the options of lenders available to you will vary, and with it the amount you are eligible for.
The lenders all have different guidelines and policy in terms of acceptable income (depending on how you are employed, how you are paid, duration of employment or payment type and so on).
There are also various other factors to consider, such as serviceability and exposure and the like.
If you are looking for a more accurate indication of how much you are eligible to borrow, I can conduct a full assessment. There is also the option of applying for a Pre-Approval so you know how much you have been approved for prior to going shopping, enabling you to buy with confidence.
There are so many other questions I get asked so I hope this selection of FAQ’s have helped answer some of your questions. Reach out to me today to run through any questions you couldn’t find here.