What lenders look at: income, expenses, liabilities and your credit file

People spend months choosing a property and about ten minutes thinking about how a lender will read their application. That is the wrong way round. Most applications are decided on four things, and none of them is the property. Know them before you look, and the search gets a lot more useful.

1. Income — and how regular it is

A lender wants to see what you earn and how reliably you earn it. Salary is the simplest case: payslips, a group certificate or tax return, and the money arriving in your account. Overtime, bonuses, commissions, allowances and casual hours are all assessed differently, and some lenders will only count part of them. Self-employed income is usually looked at over a longer period, and the lender wants to see it in your financials rather than your bank balance.

The practical point: the income you feel you earn and the income a lender will use are often different numbers. A broker can tell you which parts of your income count with which lenders before you apply anywhere.

2. Expenses — they read the statements

Lenders do not simply take your word for what you spend. They read your bank and card statements, usually for the last few months, and compare what they see against a minimum living-expense benchmark. If your statements show more than the benchmark, the higher figure is used.

That means the months before an application matter. Regular subscriptions, gambling transactions, frequent cash withdrawals and buy-now-pay-later instalments all show up. None of them is disqualifying on its own, but together they shape the expense figure the lender plugs into the calculation — and that figure directly affects how much you can borrow.

3. Liabilities — limits count, even unused

This is the one that surprises people. A credit card with a $15,000 limit and a zero balance is still assessed as a liability, because you could draw on it tomorrow. The same goes for personal loans, car finance, buy-now-pay-later accounts, and HECS/HELP debt, which reduces your take-home pay and is treated accordingly.

Two things follow. First, reducing or closing unused credit limits before you apply can materially improve the result. Second, every liability needs to be disclosed. Lenders check, and an undisclosed debt found later is a far bigger problem than a disclosed one.

4. Your credit file — history and enquiries

Your credit file records your repayment history on credit accounts and every credit application you have made. Two patterns work against you: missed or late repayments, and a cluster of recent applications. Each application is an enquiry on the file, and several enquiries in a short period can read as financial stress even when it is just shopping around.

The practical answer is to go through one broker who can compare lenders without lodging multiple applications. It is also worth obtaining a copy of your own credit report before you apply, so nothing on it is a surprise.

What this means for the plan

None of the four is about the property. That is the point. A property-first approach picks a house and then discovers what the numbers allow; a plan-first approach establishes what the numbers allow and then searches inside that range. The second is faster, less stressful and far less likely to end in a failed finance clause.

At TNC Group, the finance conversation with a mortgage broker happens before the property search — that is the Strategise and Plan steps of Strategise → Plan → Execute → Review → Optimise → Repeat. We do not give credit advice; we make sure the right professional is in the room early.

Ready to start with the numbers? Book a free 15-minute call — book here — or visit www.tncgroup.com.au.

General information only. This is not credit, financial, legal or tax advice. Speak to a licensed mortgage broker about your situation.