Casual workers have it tough when it comes to trying to get a home loan, with the banks considering them to be borrowers with unstable incomes.
Banks generally take the view that because of the nature of their income, their ability to make regular mortgage repayments is a little up in the air. The trick to getting the green light from the lender is to present a strong case with good evidence.
Martin and his girlfriend Sheena hit a wall when their home loan application was declined because Sheena had only been casually employed for two months at the time.
Fortunately for them, one of our senior mortgage brokers was able to save the day and secure their home loan with the same lender that had said no!
Buying a new home and moving in together is one of the most important stages in a relationship. It was the same for Martin and Sheena when they started looking for their first home together.
Unfortunately, what should have an enjoyable experience started off on the wrong foot when the couple began the hunt for their new house without an all-important pre-approval.
Why is getting a pre-approval first so important?
Well, trying to get a formal or final approval between making an offer and the deadline for finance (as agreed between you and the vendor in the Contract of Sale) can be very risky and can even cost you the purchase.
In spite of this, the excited couple found a newly-renovated 3-bedroom house just southwest of Sydney that they absolutely fell in love with.
They weren’t about to let it get away so they put down their deposit and, although they didn’t have a pre-approval, they felt they were on their way to buying their first home.
The lender had a slightly different opinion though.
They were declined!
As a general rule, banks are very weary of borrowers in casual employment. Apart from having a 5 to 10% deposit as a minimum, most lenders require such borrowers who work full time to have a stable employment history, that is, at least 6 months in the same field of work.
However, for casual workers they want a minimum of 12 months in the current role.
In Sheena’s case, she had just started a new job as a teacher two months ago without any prior work history in the industry. The couple didn’t think this would be a problem since teachers enjoy stable employment but the bank assessed their home loan application and declined them on the spot!
A Clever Solution
Presenting the facts
Despite being having their application declined, Martin and Sheena didn’t lose hope. They tried to find a solution for their problem online.
As fate would have it, they came across Home Loan Experts, a mortgage broker that specialises in unusual employment scenarios.
Mike answered the call and, with his immense experience in credit, he was quickly able to assess the couple’s situation and find the right solution to their problem.
Mike recognised straight away that a casual employer with no industry experience would have a difficult time getting approved for a mortgage, especially if they didn’t have the required documents such as payslips, 2 years tax returns and other documents supporting her income and employment.
He approached the very bank that had declined the couple and presented facts that the bank had missed out in their earlier assessment.
He collected all of Sheena’s payslips and the summary of her payments from 2014. He started off by annualising her current YTD (Year To Date) income.
He then worked out her total income for 2014 and multiplied it by 24 to determine the annualised income over a 46 week period (the standard period of calculation for casual employees).
By taking the lowest of the three figures he calculated her income and compared her current annual earning with her past income. This way he was able to propose a more comfortable figure to the bank.
Mike was ultimately able to get the couple approved for a home loan that suited their needs by taking a common sense approach.
A Happy Ending
Martin and Sheena were over the moon to hear that their home loan application got approved by the very bank that had declined them earlier! They’re currently getting ready to move as they wait for their property to settle.
Along with being a credit expert, Mike used his expertise in unusual employment types that don’t fit standard bank lending criteria to build a strong case for his clients.
Are you facing a similar problem because of your employment?
Call us on 1800 889 743 or fill in our free assessment form and our mortgage brokers will assess your situation to find the right solution for your home loan problem.