The other day, while doing some analysis on the loans lodged over the past year and looking at the timeframes and where delays have occurred, I was struck by the number of stages that a loan application needs to go through before settlement and the number of people that the file depends on to go smoothly. The people involved in the process of the loan can include the broker, file owner at the bank, credit analyst, valuer, borrower’s solicitor, bank’s solicitor, vendor’s solicitor, accountant, financial adviser (if financial advice is required), real estate agent and, possibly the tenant. Delays can occur at the hands of any of these stakeholders with deleterious consequences. That’s why it is advisable that to the extent that it is possible, you keep as much control over the process as possible in order to avoid possible pitfalls. After all it is you who will suffer the most if things go awry or benefit the most from the process being a smooth one. Whether you are applying directly through a bank, or through a broker, the following tips will help ensure your application progress a s smoothly as possible:
Ensure the loan application is comprehensive
A credit analyst will review the file based on what is submitted to them. It is in your interests to make their job as easy as possible. You can do this, but ensuring that all items on a loan checklist are presented in a neat manner and any discrepancies (for example, drop in income or defaults) are explained in full. Your banker or broker will be presenting your submission to the credit analyst and it is important you work with them to present a paper that will be easy to analyse. Some investors who are borrowing frequently maintain a ‘finance pack’ consisting of items commonly requested such as financials and bank statements, a practice that can be very helpful in making the finance process relatively pain-free.
While is far from my place to dictate your personal calendar, it is incumbent on me to suggest that period between purchase date and settlement of a property is not the ideal time to go on an overseas holiday. With commercial finance you will be required to sign documents and may need to get financial and legal advice in order to do so, and this is difficult to do while on the Inca trail in the Andes or sunning yourself in the Greek Islands.
Ensure you have a solicitor and financial adviser ready to sign documents
Depending on your loan structure you may be required to obtain legal and financial advice as part of the loan process. You will better prepared if you know this upfront and an plan for it.
Order your valuation upfront.
The valuation is one of the great unknowns of every application, therefore it is best that it is addressed early in the application process in order to prevent any nasty surprises later on. Most banks will allow you to order the valuation and re-assign over to the bank after you submit the loan. Having control over the valuation gives you the flexibility to re-use the valuation if the original bank doesn’t approve the loan for whatever reason, and also provides you with a reference in terms of comparable sales and other information that you should have a right to have access to considering you are the one paying for it. Before you do order a valuation, however, make sure that you are using a valuer who is on most lender’s panels or at least check with the intended bank that the valuer is on their panel.
Remember that it is ultimately your interests that are served by ensuring that the process goes smoothly and therefore it is advisable that some ownership be taken. While it is important that you surround yourself with trustworthy professionals, it is also advisable that you are not shy in asking questions and understanding the loan process. Gaining this understanding will help ease your nerves and also ensure that you are front of mind for whoever has your file. Don’t be shy!
In my experience, borrowers who have engaged with the loan process and, in particular, the above 5 points, have had far better borrowing experiences. Debt is a very important part of most investor’s strategy and it deserves as much attention as choosing the right property.