Lending Criteria Are Tightening

Banks now scrutinize loan applications more carefully. They look closely at your income, employment stability, and savings history. This ensures borrowers can service their loans over the long term.

Common new requirements include:

• Higher deposit sizes: Usually, at least 20% of the property value. Some lenders now prefer 30% or more, especially for investors.
• Proof of savings: Recent bank statements showing genuine savings over three to six months.
• Debt-to-income ratio: Banks assess whether your total debt payments, including the new loan, stay within 30-40% of your income.

Tip: Keep records of your income, savings, and debts organized. This speeds up the approval process.

---

Documentation Requirements Are More Stringent

Lenders want to verify your financial situation thoroughly. Expect to provide:

• Valid ID (passport, driver’s license)
• Proof of income (pay slips, tax returns)
• Evidence of savings or investments
• Details of any existing loans or liabilities

Important: For overseas clients or migrants, you might need to submit translated and certified documents. Banks may also ask for bank statements from non-Australian accounts.

Note: Some lenders now require a full explanation of the source of your deposit funds, especially if they come from overseas.

---

Source of Funds and International Transactions

If you're moving savings from overseas, the source of funds must be legitimate. Common accepted sources include:

• Sale proceeds of property or assets
• Gifted funds with a gift declaration
• Earnings from employment abroad

Regulatory focus: The Australian government, through the Foreign Investment Review Board (FIRB), monitors large transfers and foreign investments. Make sure your transaction complies with FIRB rules, especially if the amount exceeds AU$1 million.

Expert Tip: Working with a financial advisor familiar with cross-border transfers can streamline this process.

---

How to Strengthen Your Application in a Tightening Market

Despite stricter criteria, several strategies can boost your chances:

• Build a sizable deposit: The larger your deposit, the better your loan terms.
• Maintain a clean credit history: Avoid missed payments and overextending your credit cards.
• Show consistent income: Stable employment records enhance confidence in your ability to repay.
• Organize your documentation: Prepare all necessary paperwork in advance.
• Consider guarantor loans: If you're short on deposit, guarantors can help secure approval.

Remember: Every lender has its criteria. Shopping around can find options better suited to your circumstances.

---

Understanding Australia’s Mortgage Landscape

For newcomers, understanding Australian mortgage products can be daunting. Here are some key facts:

• Principal and interest loans: The most common; you pay off both the loan and interest over time.
• Interest-only loans: Payments go towards interest only; suitable for investors during initial years.
• LMI: Lenders Mortgage Insurance applies if your deposit is less than 20%. It protects the lender, not you.

Example:
Suppose you're a first-time buyer with AU$50,000 savings. To buy a property valued at AU$300,000, you'd need a AU$60,000 deposit for a 20% loan. If you only have AU$50,000, you'd need to pay LMI or increase your deposit.

---

What the Future Holds

The ongoing cleanup is expected to continue into the coming months. Banks are cautious but also eager to lend to creditworthy borrowers. If you’re prepared, it’s still possible to secure favorable terms.

Key advice: Stay informed. Follow updates from ASIC, RBA, and your lender.

---

Final Thoughts

The banking sector’s cleanup aims to ensure long-term stability. It requires borrowers to be more diligent and transparent. Although it may seem challenging, your financial discipline can turn these changes into an advantage.

In my 20+ years helping migrants secure mortgages in Australia, I’ve seen how preparation and understanding open doors. If you’re ready with documentation, proof of funds, and a clear plan, you can succeed even in a tighter lending environment.

Remember, the goal is to establish a solid financial foundation—whether buying your first home or expanding your property portfolio. Stay proactive, ask questions, and seek expert advice if needed.

“Financial stability doesn’t come by chance; it’s built through informed decisions and careful planning.” — Trusted Financial Advisor

Keep informed, stay prepared, and navigate the bank cleanup confidently!