When getting a home loan or a car loan the lender needs to assess your risk as a client and make sure your chances of defaulting are minimal. As a result the lender will ask for a lot of information upfront to get an idea of your situation and to asses this risk. This includes your employment and income records and existing loan statements.
One of the documents you will need to provide are your bank statements. So why do brokers need bank statements? A broker will need to pass this information over to the lenders who want to know your past financial behaviour, so they can be confident that you have the capacity to make your loan payments on time. Do mortgage brokers go through bank statements? A broker can go over the statements to try and address anything that might stand out and get an explanation for before submitting to the lender. If you are applying for a loan jointly with your partner or spouse, they may want to look at both accounts together. This helps to see the income and expenses of the family as a unit.
What will a lender look at on my statements?
- Your income: The first thing they will look at is your income. They will check your bank statements to see if your income is coming in consistently. The lender will want to see the frequency of income, the net amount and how long you’ve been receiving employment payments for.
- Spending patterns: Your lender will check your typical expenses with a view to understanding whether you will have sufficient funds to pay the instalment after taking the home loan. They will also check for any other liabilities or expenses that you may not have mentioned to them. If your account hits zero or gets overdrawn almost every month just before you’re paid, lenders may suspect that you will not be able to pay off your home loan comfortably.
- How responsible you are with your money: If there are dishonoured payments or late charges on the credit card or utility bills may raise a red flag.
- You have the funds for the deposit: Banks prefer borrowers capable of putting down a deposit. Your lender may like to see available funds in your bank account before approving the loan.
What are Electronic Bank Statements?
These days it is rare to hand over physical bank statements and some lenders do not accept physical statements as a documentation option. The process is handled digitally using a service like bankstatements.com.au. Your broker will share a link with you which you can use to allow the service to have temporary access to your online bank statements. Once downloaded, your statements are then automatically analysed using built in rules and income and expenditure is grouped to give a quick and clear overview of your account conduct. Both Brokers and lenders like this method because the information comes directly from the bank. There have been cases where physical statements have been manipulated by the client or the broker resulting in fraud whereas the electronic method avoids this.
Before you apply for a home loan, personal loan or car loan, it’s good practice to set up habits that show lenders you’re responsible with your money. It will be in your best interest to prune any discretionary expenditure (e.g. online gambling accounts, frequent expenses on restaurants). These will be found and grouped quickly using electronic statements and will be points against you in your application. One advantage of checking your bank statements regularly and pruning them ahead of time before a loan application is that it will also lead to better financial management in the long run.