Previously, only a deposit and a full-time job are the standard requirement needed to get a home loan, but not with this day and time. Today’s lenders are requiring much more.

What you need to get a home loan? (what lenders want to know)

Today’s financial instability has brought a prospective home-buyer’s complete financial history under the microscope, as home loan lenders try to determine whether they are ever going to get their money back.

A potential display homes buyer’s credit history: credit cards, personal loans, HECS/HELP (Education Contribution Scheme/Higher Education Loan Programme) debts as well as their rental history are being completely and thoroughly checked out before any approval is granted to home buyers.

The number of lenders with home loan requirement needing only a 3 percent deposit has doubled to 5 per cent since January, according to ratecity.com.au, a financial comparison website. Many lenders are still wary and keen to avoid the kind of risky loans that had given rise to the global financial crisis.

Now lenders are more than ready to comply with new responsible lending practices.

Prospective buyers of house plan designs are advised not to take up the banks’ offers of increasing their credit-card limit, under any circumstances, as this would become the basis for refusing them of their home loan.

Banks are now wired to consider the worst-case scenario, as many bad home loans have gone unpaid as, according to a survey done last April, more  than one in five Australians are struggling to repay debt due to the increasing costs of living.

Furthermore, according to a credit-risk manager at one of Australia’s big four banks, one of the biggest determinants of whether a bank will offer a home loan is an applicant’s credit scores, which is acquired through credit agency Veda Advantage.

Likewise, banks also discriminate on postcodes.

Bills payment history, meaning bills that are not paid on time, are also being thoroughly checked and evaluated for any pattern as well as an applicant’s employment history; that is whether applicants have been in steady jobs for longer than six months and their assets and liabilities.

Banks are now being thorough in their credit history check, with stricter and stiffer home loan requirements and guidelines being implemented.

What do potential home-loan borrowers need to do?

With today’s stricter home loan guidelines and requirements, potential home-loan borrowers need to take action now to ensure that there are no hidden obstacles that could prevent the granting of their home loan in the future.

A Smartmove professional mortgage adviser advises:

• if you suspect of any previous misdemeanors on your file, get a copy of your credit report from Veda Advantage. This would allow you to overcome any issues that may arise in the credit-application process.

• take measures to keep your credit file clear by undertaking a My Veda Alert subscription, which would also protect you against identity theft.

• update all your current or potential creditors — company, personal or otherwise—to all changes to your address details to make certain that bills don’t get lost.

• make sure to pay your bills on time and, if possible, set up direct debits for bill payments in order to keep your credit file as clean and tidy as possible.

Recently, a new report was released from Fitch Ratings, a global ratings agency which details mortgage performance by postcode, showed that mortgage delinquency rate in Western Australia has increased while Queensland has made history as Australia’s worst state for mortgage defaults.

The Fitch Ratings report showed that a rise of 1.99 percent, from 1.94 per cent, was being observed from the mortgage delinquency rate in the six months to March in WA while Queensland was recorded with the highest number of mortgage holders that are in debts at 2 percent.

This means that there is an increase in the number of Aussies all across the country who are struggling to pay their mortgages.

The report further revealed that 2315 including Nelson Bay is reported to be the worst-performing postcode in the country showing one in 18 mortgages or 5.6 percent are at least a month overdue.

Likewise, New South Wales (NSW) is home to five of the 10 worst-performing regions in the nation, with Fairfield-Liverpool as the worst-performing region in Australia, having one in 35 mortgages at least a month overdue and Victoria is home to five of the 10 best, with Mill Park and Brighton East as home to Victoria’s hardest-suffering home loan customers.

In the top 20 worst-performing postcodes in the country are Rockingham, Mandurah, Casuarina and West Swan.

Queensland’s Logan city is recorded to be the worst district in Australia for mortgage delinquency with 2.1 per cent of mortgage holders in default beyond 30 days.

At Fault

With borrowers experiencing significant financial distress resulting in mortgage stress seen spreading all across the country, the blame is attributed to the summer flooding as well as the interest rates increases, including one in November.

The statewide rising trend of mortgage stress is expected to further negatively influence the prices of home designs by pushing down declining house prices as “mortgage stress” sales increase.

Prices in house plan will again be forced to be lowered, softening the property market as many “mortgage stress” house owners will be forced to sell their houses.

Though the impact of interest rate increases takes time to be seen, “mortgage stress” home plan owners still are affected for they are worried for another interest rate increase.

With Australian homeowners impacted with the recent summer floods and interest rate hike and an expected interest increase in June, they are now more than ever under stress with their mortgage payments as some borrowers are in arrears by one or more payments.

All Time Low

With the recent development, Australia’s economy is now mixed and struggling.

With NAB’s Index of Business revealing further grim news for the domestic economy, it has reached its lowest ebb since early 2009 when the economy was still spinning from the shock of the global financial crisis.

Used to measure business conditions based on measures of trading conditions, profitability and employment, the NAB’s index has recorded near-record low levels across all three sectors.

Conditions in retail, manufacturing, wholesale and construction are still very poor.

However, the mining sector continues to save Australia’s economy as mining conditions outperformed all other industries.

With the spiraling energy prices, new regulations and a coming price on carbon, Australia’s property owners, managers and listed property trusts are now forced to look seriously at their energy usage and levels of investment into energy efficiency solutions.

The increasing prices in energy and water have also forced potential home designs buyers to look into the benefits of buying green houses.

As defined by Wikipedia, “a Green home is a type of house that is designed to be environmentally friendly and sustainable, focusing on the efficient use of “energy, water, and building materials.””

Designed to conserve energy or water and improve indoor air quality, target recycled or used materials in order to produce less waste in the process, a green house or home might be the answer to the spiraling energy crisis.

According to Archicentre, the building inspection service of the Australian Institute of Architects, the ever increasing prices in energy and water will cause a heightened value of existing green homes and commercial premises.

As the running costs of the rising energy prices eating into every family budget and the bottom-line of every business, Australians have nowadays looked in the affordability of green houses.

The pressure of housing affordability as well as the initial building or purchase costs and the required services such as power, water and gas needed to run a home have become a massive concern for every Australians nowadays.

Prospective buyers of home plans are now concerned with the running costs of building a green house and the cost of maintaining them and are automatically factoring these costs into their balancing of their mortgages and other costs.

With these spiraling concerns, prices of green houses have been set to soar due to its demand.

Green houses are now in great demand. Though normal houses are not as pricey as green houses as well as these are not so difficult to maintain, green houses are still more environment-friendly and cost efficient with regards to energy.

However, the payback period for solar panels and other energy saving technology has shortened considerably with power costs in the past two years skyrocketing.

One of the biggest trends in new homes and renovations is the likelihood of the introduction of quality-based building inspections. The said inspection is said to be aimed to ensure that homes with a six or more green star design are actually built by home builders to the standard.

The government will also focus on the quality of construction of renovations and new homes in the future in relation to sustainability of green houses.

It has been in the news recently that the banks in Australia are refusing to finance loans to people who are interested to buy flooded homes. Banks are snubbing and refusing to finance loans of shrewd would be buyers who are desperate to snap up a bargain in the post-flood Ipswich property market.

According to Brett McGrath, the Herron Todd White senior valuer, in spite of the recorded 3300 homes being written off and the 1700 house plans designs needing repair which were all affected by January’s disaster, there are still plenty of shrewd and desperate buyers who want to purchase these damaged and flooded houses.

Mr. McGrath said in his statement during a luncheon for more than 120 people at The Ipswich Club that there are still many buyers who are eager to purchase flooded homes. However the banks are refusing to finance these loans.

House land packages sold by home builders and purchased via cash by people who have a spare $150,000 in the bank are the only properties moving off the market.

However, those people who want to borrow in order to buy these flooded properties are not having any success at all in their loans approval for banks are refusing to them.

According to The Queensland Times May 5th edition, major banks in the country have been choking the region’s property market for they have refused loans to people who want to purchase Australia houses for sale across huge swathes of Ipswich and other flood-hit communities.

Lenders were accused by real estate agents of blacklisting entire suburbs that were affected by flood in January.

With these worsening development, would be house buyers of these flooded properties are facing difficulties with banks and lenders alike refusing to finance loans.

Peter Mendoza, the Ipswich chairman for the Real Estate Institute of Queensland, said that would be home buyers could only purchase home for sale by using cash which had led prospective home buyers to be furious.

According to Mr. McGrath, the property market has already reached its worst in almost 20 years before the floods hit.

Mr. McGrath expounded that the property market has been affected by more than just floods. In addition to the worsening market due to the floods, the brutal infrastructure costs and the end of the first home owner’s grant have also added to the property market crisis.

These three causes have lead to the worsening condition of the property market.

Mayor Paul Pisasale commented that during this worsening crisis banks and insurance companies are needed to show compassion.

Banks and insurance companies should show compassion instead of refusing to finance such loans applied by these would be buyers of flooded homes. The people need these banks and lenders to be more agreeable for a loan in order for the property market to thrive.

Mayor Paul Pisasale stated during the luncheon held this week that there would not be any more hidden clauses.

Mayor Pisasale further added that the floods have made them stronger with Ipswich challenging the problems of the GFC, with more than 240 new businesses starting up during that time, now they will do the same with the flood recovery, there will be no fence around their global city.

With the increasing number of first-home buyers snatching up apartments and townhouses that may otherwise have been bought by investors, first-home buyers are now acquiring the benefits brought about by the sluggish Perth housing market.

According to the Real Estate Institute of WA, investors had lost interest in buying house & land packages due to the city’s over-priced properties; thus, decreasing competition and forcing down prices of house plans designs, particularly for multi-residential properties which usually attract investors.

March quarter figures released by REIWA’s this week has showed that the median price for a grouped dwelling that includes apartment, unit, townhouse or villa in Perth has dropped by about $7000 to $402,000, while outside the capital it fell about $2000 to $325,000.

REIWA president Alan Bourke said in his statement that investors often preferred multi-residential properties but they are thin on the ground.

Recent property market conditions appear to be in favor of first-home buyers who have been reasonably active and represented about 23 per cent of buyers during the quarter.

According to the latest state government data, the median purchase price in Perth for first-time buyers was $415,000 and $325,000 for those in regional areas.

The statistics follow Premier Colin Barnett’s controversial comments this week which persuades first-home buyers of home designs to lower their expectations to enter the market.

During the March quarter, healthy first-home buyer activity was in disparity to existing home owners looking to trade-up.
According to Mr. Bourke, many of them were “caught in a bind”, unable to commit to selling before buying, causing the property market to stall.

This week, WAtoday.com.au revealed that the state’s property market had fallen into the worst fall in nearly two decades.
According to the government’s official land information authority, Landgate, in just 12 months, activity in the housing market has declined by 15 per cent while more than one-third since the height of the boom in 2005-06.

Even though during the March quarter sales activity had improved, according to REIWA, the overall turnover continued to remain 25 per cent below average in Perth and 35 per cent below in the country.

It had turned out to be a buyers’ market, with 50 per cent more homes for sale than required to meet demand, Mr. Bourke said.

To get the deal done most home builders are reducing their asking price by around 7.5 per cent while sellers who need a quick sale just simply adjust their expectations and asking price before going to market.

On the other hand, according to Mr. Bourke, the fall in median price from December 1 was expected to be only 1 per cent.

Mr. Bourke additionally stated that preliminary data suggests that for the March quarter, the median house price will be about $485,000 for Perth and $375,000 elsewhere.

The rental vacancy rate has tightened regardless of a flooded market and has led to the first increase in rental prices in 12 months.

During the March quarter, rents rose by $10 to $380 per week in Perth, while the vacancy rate remains just above 3 per cent.

Mr. Bourke explained that typically, when the market is flooded with properties, many investor-sellers decide to withdraw their listings until conditions improve and shift their properties into the rental market which relaxes the vacancy rate. However, this doesn’t seem to be happening at the moment.

Australia’s display home vendors are facing a weakening winter demand if they are not prepared to meet the market with the stock levels slowly increasing over the next few weeks.

With the recorded rise in Australian residential building approvals seen in the last month of the first quarter of 2011, home builders have been quite busy constructing units in support of these increased building approvals.

However, if Australian vendors of house and land package are not prepared to meet the market, they would surely encounter a softening of the house for sale market with the flagging winter demand.

Of the weekend’s 577 reported auctions, the clearance rate was 60 per cent, where it has been hovering since February.

According to Adrian Jones of the Noel Jones Agency, his agency had only sold six of its eight auctions, which includes the current church site at 14-16 St George Crescent, Ashburton.

Jones recalled that seven bidders fought to bid for the block, which is the church site at St George Crescent, Ashburton, that covers 2400 square meters. The church site was on the market around its quoted price of $2.5 million, before it was sold for $3.21 million.

Mr. Jones further commented that ”It sold for well over the expected price and just goes to show that if you have the right property at the right price, the public will come out and bid for it.”

Another property sold by Mr. Jones is at 34 Acacia Street in Box Hill which was sold under the hammer for $1,084,000 but was sold for $900,000 about two years ago.

These comes to show that Australians have become more concerned with the prices of design house and are more vigilant on buying expensively priced house for sale.

”The marketplace is much more price sensitive and people are more cautious about paying record prices, but when you put the right property on the market, people will compete.” Mr. Jones said.

Ruth Roberts of Woodard Carnegie said that her agency had multiple bidders and had sold their two Sunday auctions in Glen Huntly.

Roberts explained that nowadays bidders are being cautious; however, buyers are also focusing their attention to better properties.

Leading Agents of Australia has released its annual sales figures and stated that “buyers are now in a better position to enter the higher end of the market”.

Jock Gilbert, LAA chairman, said that ”After years of consistent growth there has been recent speculation of a housing bubble.”

Gilbert explained that though there is evidence of a slowdown; however, the figures indicate that Australia is now experiencing a more even playing field for vendors and buyers, rather than a slump.

In the meantime, Peter Rogozik, a buyers’ advocate said that the overall auction figures did not essentially mirror accurately what was a segmented property market.

According to Rogozik, the secondary location properties were undergoing price corrections, or reductions, of about 5 per cent.

Rogozik further clarified that ”However, the quality segment, which represents a very small portion of the market, is still holding up well.”

Frank Valentic, Advantage Property Consulting’s, said that for his client at 59 East Boundary Road, Bentleigh East, a realistic reserve contributed to a strong result.

Recently in the news, it has been reported that the number of loans from people who want to buy new houses for sale have dropped.

According to the report, residential property prices have increased in 2010 and will continue declining in the next six months as big mortgage brokers report a 20 per cent plunge in loan numbers.

Many home for sale will be affected by this situation.

Mr. John Symond, Aussie Home Loans managing director, said that its new loan volumes had dropped 20 per cent in the past four months for the reason that the housing market has become soft.

Mr. Symond added that the Aussie had kept its 5 per cent share of the market and, until December last year, usually settled $1 billion worth of new home loans a month.

Mr. Symond reiterated that the general consensus is that the market is down around 20 per cent in new loan volumes.

This makes the houses for sale market in jeopardy. Many newly formed families are now delaying to execute their house plans for their new family as the property market is down.

Many newly formed families are hesitant to take on a loan with the still on going global economic crisis which has affected first home buyers, thus reducing the number of house buyers resulting to the housing market becoming soft. This means that with the number of first home buyers risking to take on a loan, the number of first home buyers who want to pay the sellers price are also dwindling resulting in the property market favoring towards the buyers.

Mr. Symond said that in general, housing throughout the country is certainly in a cooling stage which is swinging towards a buyers’ market particularly for properties above $700,000 or $800,000.

Mr. Symond further stated that Australia’s housing market is beyond the peak of the cycle and will probably go on to soften over the next six months.

Currently, the housing market in recent months is now starting to get soft and is still estimated to get soft in the subsequent six months.

Though, property prices close to the city are still quite competitive.

Mr. Symond said that the cheaper prices close to the city, with the ranging prices up to $600,000 or $700,000, are still quite good for the reason that first home buyers and small investors are all vying for those prime properties.

Mr. Symond further added that the competition among brokers had not intensified in spite of a host of post-global financial crisis mergers and acquisitions in the sector, making the industry more concentrated.

With this development, the property value for homes for sale are now significantly decreasing with the softening of the market; however, even with these development, many first home buyers are still hesitant to take a loan due to the ongoing global crisis leading to new home  loan takers plunging.

With the softening of the market, many are commenting that it is best that the prices of houses for sale are significantly down at this time while there are still jobs around.

However, the problem is with fewer couples risking to take a loan, though the property market is down, many houses are now without buyers.

In has been in the news lately that Australian residential land sales is down 40 per cent. It has reached their lowest level in a decade after almost halving from a year earlier.

A deteriorating house for sale affordability is being experienced in Australia recently. It has been a weak year for house plan building.

According to the HIA-RP Data Residential Land Report, they found out that in the December 2010 quarter, the volume of house land package sales dropped sharply, with sales down by 40.4 per cent compared to the same quarter in 2009.

The report also found that the plunge in sales comes as the weighted median land value for Australia grew by 4.1 per cent in the quarter to $194,161.

HIA economist Matthew King said that the sharp drop in the volume of land sales indicates a very weak 2011 for new home for sale building. He also added that forced by constraints on supply, the rise in land values highlights an on-going deterioration in new home affordability.

With a median value of $269,000, Sydney continues to be the most expensive place to buy residential land.

Sunshine Coast, with a median value of $240,000 and Melbourne coming in at $220,000 are also expensive areas to purchase land.

Melbourne also recorded in the December quarter a 50.1 per cent drop in land sales compared with the same quarter in 2009.

In Melbourne and Sydney, auction clearance rates have gone down to about 60 per cent since the start of 2011, well down from the highs of 80 per cent as seen last year. This is due to the effect of higher interest rates, crumbling affordability, and economic uncertainty which took their toll.

In capital cities, the residential land values had increased by 5.9 per cent in the December quarter and 8.2 per cent higher in annual terms.

According to Enzo Raimondo, Real Estate Institute of Victoria chief, the recent residential market in Melbourne and Victoria has entered into a different phase of lower transaction numbers and reduced price growth.

According to RP Data-Rismark figures released last month, nationally, home prices were flat in February, subsequent to a revised 1.5 per cent drop, seasonally adjusted in January, with January’s fall the biggest decline since 2005 when the index began.

All throughout the capital cities, Melbourne has the highest growth in land values, increasing by 13.5 per cent in the quarter, while Sydney was up by 3.6 per cent.

Hobart also saw a 14.5 per cent slump in land values in the month.

Southern Tasmania, Murray Lands in South Australia, and northern South Australia, all of which had median lot prices of $80,000 or less, are the three most affordable land markets in the country the report said.

According to HIA’s Mr King, quite apart from the substantial damage produced by the interest rate hikes of last November, new housing remains to slump under the weight of the excessive cost of serviceable land.

The high regulatory costs, planning and zoning delays, disproportionately high taxation, deficient land release strategies, user pays infrastructure charges, and an on-going credit squeeze may cripple land values, Mr. King say.

Last November, the Reserve Bank increased its key cash rate to 4.75 per cent, a move that was followed by even larger rate increase for borrowers in the days afterwards.

Australian couples have now put their house plans ahead of their plan of having children. They want a house plan first before having kids.

As the cost of entering the property market rises, around one in three Australians are now planning to delay their plans to start or grow a family.

According to a PRD nationwide survey, out of the 2000 Australians that were surveyed, it was found out that 34 per cent of the respondents of the survey were considering delaying their plan of having children as house prices increase or entry cost rises.

The increasing house prices has catapulted the Australian couples to change their plans of having a family to having a house first.

Aaron Maskrey, the PRD nationwide research director, said that because couples want to buy their own homes first, a significant number of them are postponing their plan of starting their own families.

Maskrey commented that though the long-term trend has seen prices for houses rising; however, the current softening of values in many areas are possible to attract many potential buyers into home ownership as these conditions will not hold in the long term.

He added that this condition has changed important life decisions, such as when to start a family.

Australian couple’s plan of starting a family, i.e. of having children, has now taken a backseat to the plan of buying a house. Because Australian couples perceive that the softening values of home designs would not last long, they are now changing their plan to having first their own house instead of having children first.

This trend has opened the market for Australian house plans; thus, the result is increasing the price of home plan.

Australian couples are now considering buying first their own house instead of starting making a family particularly having children.

As shown by the latest REIA Housing Affordability Report, it now costs an average Australian family about 35.3 per cent of their income to service the home loan.

This report shows that though this is still down from the previous year’s REIA Housing Affordability Report by 4.6 per cent, this still is up from 34.8 per cent in September 2010.

However, the survey also shows that more than half of the respondents or 55 per cent of them would not allow the state of the property market prevent them from starting a family.

This result shows that though some of the Australian couples are considering delaying having a family first to buying a house, most of them are still intending to start a family particularly having children. The condition of the property market has not discouraged them from intending to have children. Though having children has taken a backseat to buying a house.

Maskrey added that the remaining 10 per cent of respondents that were surveyed said that the research was not applicable to their situation.

As expected, last week, the Reserve Bank of Australia has left the cash rate unchanged at 4.75 per cent and the post-meeting statement released was almost identical to last month’s statement.

Almost all are of the same opinion that buyers of house for sale need to sort through all the large volumes on the market to find a quality property as the performance of Melbourne’s residential market is illustrated differently depending on who you ask.

According to Greville Pabst, from valuer WBP Property Group, the market has been observed to be in complete flight in March, with 2925 auctions and an average clearance rate of 63 per cent.

This year alone, there have been 5500 auctions in Melbourne, a nice improvement of 200 over this time last year. The majority of the properties passed in have sold later, while the clearance rate is lower.

Sean Thomson, one of WBP’s senior residential advisers, states that what is happening is like a textbook case of quality properties finding a buyer and compromised ones being left on the block. He also added that now is a good time to be a buyer instead of house builders for most auctions are selling close to their reserve. However, the quality of property of houses for sale being offered is lower than those offered last year.

Thomson commented that any home or house plans or apartment that isn’t correctly priced is not selling on the day.

Buyers need to be selective in this current market. Investors are likely to be sorely disappointed in their belief that they are getting a bargain when they see the performance of their asset.

With just under 3000 auctions scheduled, this April appears to be one of the busiest. Vendors looking for to cash in on what they observe as a plateau in Melbourne real estate are motivating this activity.

According to Thompson, though this reaction is characteristic for this stage in the property cycle, however it is not a sound advice.

He commented that the last time he has seen this type of market was in the period of March to May of 2008 when the stock was high and clearances were in the 60 to 69 per cent range. He further said that astute investors who bought during this period will have seen an average 33 per cent growth in the value over the last 20 months.

The market is treading water, and there is still a lot for sale come Easter, which has been noted to be slowly selling when vendors meets the market, says Buyer agent JPP.

The market is falling to pieces as JPP describes, with the sector over $1.5 million beginning to soften. Several properties are failing to be sold at auction, and there is no shortage of vendors still happy to try their luck. However, overpriced properties are struggling, while the top properties are still selling with multiple bidders.

This trend in the market results to an increased supply than demand and having vendors in bigger difficulty than they have been for the past six months, says JPP in his market overview.

He commented that the $400,000 to $1 million sector is by a long way the strongest as it is the investors’ marketplace of choice. This sector has been the strongest performing segment over the past decade and should hold the least risk for investors going into the next decade.

Meanwhile, valuer Landmark White commented that while the volume of sales held up during much of 2010 in the inner Melbourne apartment market, anecdotal evidence suggests that sales rates have slowed over the first quarter of this year. However, he has noted that low vacancies have significant rental levels increase, with two-bedroom apartments showing the best growth followed by three-bedroom apartments.

Nevertheless, an oversupply and its knock-on effect to prices could be threatening with close to 13,000 apartments in the development pipeline in Melbourne.

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