Five months in and the COVID-19 global pandemic’s effect on our economy keeps on see sawing. While previously considered recession-proof, medical professionals have also been impacted, with some individuals having experienced a downward change to income or hours worked as a result of reduced patient contact or choice for deferring elective surgery. Understandably, lenders have opted to remain cautious in their loan assessments and have tightened their credit policies.
However, many medical professionals can still qualify for a loan, albeit it is a lengthier and more stringent application process. Many lenders have offered mortgage repayment holidays for their customers but want to ensure they are not signing up new home loans that will enter financial hardship.
Additional hurdles for medico applications
Lender Approval Times
Applications with many are being prioritised according to urgency
Efficiencies were already reduced post Royal Commission for most lenders but the impact of COVID-19 has only contributed to this. Credit and loan processing facilities of many lenders are located offshore and some of these entered full lock-down. Many employees have been asked to work from home and call centres have been overwhelmed with customers seeking COVID-19 assistance.
Choice of lender goes beyond product
Loan application processing times vary from 48 hours to 8 weeks depending on the lender so it is crucial to have all documents in order for a smooth application. Choosing a lender who can give you an efficient credit decision is becoming just as important as choosing one with the better loan product or interest rate.
Income verification
Lenders tighten their assessment processes
Lenders’ concerns about borrowers experiencing a dip in income has prompted them to ask for payslips and evidence of salary credits to within 2 weeks of the approval date of the loan. Borrowers with pre-approvals or even unconditional approvals with prolonged settlement dates need to be very mindful that their borrowing capacity may change and loan approval rescinded if their income has changed or dropped.
Self employed professionals will need to provide updated BAS in addition to their tax returns to verify that their turnover has been consistent post COVID-19 so as not to raise any red flags.
Shading of income
Most lenders will not accept JobKeeper payments as income and any enforced annual leave or if applicants have been stood down will generally trigger a declined decision for finance application.
Reliance on probationary periods or casual income is also viewed as high risk and will be scrutinised.
Where previously some lenders have relied on 80% of bonus incomes or commission payments to this ratio, this has also been reduced significantly when assessing borrowing capacity.
Likewise, rental income from investment properties is shaded to 50-60% instead of 80% with some lenders as a result of many tenants failing to meet their obligations due to job losses.
Loan Value Ratios
Medico policies with some lenders pre-COVID-19 generally allowed medical professionals to borrow 90% to 95% of property values without having to pay mortgage insurance. Some lenders have now reduced this ratio making saving a deposit essential.
Buying your first house during a global pandemic as we’re experiencing right now with Coronavirus is possible. It’s just a little more complicated as lenders are more cautious.
If you have further questions about your first home purchase, consult one of DPM Lending Consultants, book a free initial consultation or call 1800 376 376.
Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.
