In her article this month VICTORIA COSTER, the CEO of Credit FIX Solutions and Credit FIX Lawyers focuses on why it is so important to keep your credit report clean and the challenge your mortgage broker will face to secure a loan for you from any bank or lender if your credit report be tarnished.
Mortgage brokers work tirelessly to get consumers the most suitable loan options for their clients.
Not only do they have to spend hours discussing the consumer’s financial position, but they also have the hurdle of finding out what the state their credit reports are in.
A mortgage broker is a person or institution who plays ‘matchmaker’ between property buyers and lenders – i.e. helping borrowers get home loans and helping lenders get customers.
Mortgage brokers work on the borrower’s behalf to arrange the appropriate finance for them to purchase their home, offering advice and guidance throughout the process.
A good broker will:
- Work out what you can afford to borrow
- Understand your property goals and help you achieve them
- Discover options suitable to your circumstance
- Explain various loan products (for example a variable or fixed interest rate) what they cost and what features they have (products like offsets or redraw facilities).
Generally, brokers have arrangements with specific lenders to offer home loan products to their clients and typically receive commissions from lenders for every loan arrangement.
Brokers are legally required to work in your best interest or risk incurring fines more than $1 million.
Why is it hard when a client has bad credit?
Imagine a broker comes to your home to discuss your home loan options. You sit there for an hour or two and then the broker asks you to organise a tonne of paperwork for them to assess your financial situation.
You manage to get the paperwork to them 2 weeks later.
Then the broker has to spend hours and hours looking at products, following strict regulations, before offering you some suitable loan options. This is before the home loan has even been submitted to a Lender.
In week 3, you choose a product you are happy with and the broker submits the application.
Then there is the valuation, the delays in loan approval and mortgage insurance approval. It could be another 4 to 8 weeks before the broker gets you a response from the Lender as per conditional approval.
So, your mortgage broker could be working for you for several weeks (with no pay) before they get a Lender to approve your loan.
That could pile up to around 20 – 30 hours of work before a finance broker has a chance to earn some income.
N.B Your mortgage broker usually only gets paid by a Lender the month AFTER your loan settles.
Now throw in bad credit!
Say you have a default from a credit card 2 years ago when you lost your job. Not your fault, but suddenly, your mortgage broker must try to find a Lender to approve you with the default on your report.
Not only will your mortgage broker have to do more research, but you will also be limited with Lender options and your interest rates will be higher.
Letters of explanation will probably have to be supplied and you run the risk of NOT getting a home loan at all because the Lender has to have mortgage insurance approval.
And in most cases, if you are borrowing more than 80% of the property value the mortgage insurer will not approve your loan if you have a default.
What YOU can do to fix up bad credit?
If you cannot get your loan approved due to bad credit you have 2 options:
- Wait for the bad credit to fall off your report (defaults and court actions are listed for 5 years).
- Lodge an investigation request with the credit provider to see if they can remove the default.
Lodging a request to investigate a default can take 4 to 8 weeks, sometimes longer.
Contact us here to obtain a copy of your free eBook guide on credit reporting to understand how you can fix your credit today.
In the meantime, look after your mortgage or finance broker. Be patient and be kind!
They are doing extremely hard work, often with no pay until such time as they can settle a loan for you, and are helping you with probably the biggest decision you will make in your life: buying property.
At Credit Fix Solutions, we offer no result no fee credit repair that guarantees the best investigation possible into the listings on your credit report and you can be confident that with our experience, knowledge and business awards under our belt that you are in safe hands.
We offer free and honest consultations on your credit report if you need to ask any questions and can help you with financial assistance agreements.
Disclaimer – This article is for information purposes only and is not financial product or investment advice or a recommendation to use Credit Fix Solutions and has been prepared without considering the objectives, financial situation or needs of individuals. Before making an investment decision, a prospective investor should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek legal and taxation advice appropriate to their jurisdiction. Credit Fix Solutions is not licensed to provide financial product advice or legal advice to you, your affiliates, or your clients.