2 Friends with Similar Circumstances but Significantly Different Home Loan Borrowing Capacity

• 

  enzioFirenze on 06/11/2017 - 23:40

  +3

  you say relationship status is different, how so?

  • 

    bcarp on 06/11/2017 - 23:51

    +2

    You also haven't mentioned incomes or occupation, past loan applications (whether successful or not), credit card/line of credit limits, & assets.

    • 

      itsdougie on 07/11/2017 - 00:22

      You also haven't mentioned incomes or occupation, past loan applications (whether successful or not), credit card/line of credit limits, & assets.

      same pay band 110k, no past loan applications. Managers in different departments and both ongoing, no debts (credit cards 20k nothing owing at time of application), hecs paid off.
      As mention just the car as assets owned outright - similar redbook value.

  • 

    itsdougie on 07/11/2017 - 00:10

    I have a GF, he doesn't. she was not part of the application.

    • 

      k-rokfm on 07/11/2017 - 08:41

      +1

      Did you say she will be living with you though? It may have been part of the process of "another person, another support for this loan" process

      • 

        enzioFirenze on 07/11/2017 - 09:00

        yeah this may have had some bearing. Another thing to note is whether one is self-employed (I see that's not the case so it won't be relevant here) but if you are self-employed and even if you earn 200k pa, banks will make you go through hell to get a home loan.

      • 

        Quantumcat on 07/11/2017 - 16:44

        +1

        You'd think a gf would be a potential dependent and reduce disposable income

      • 

        itsdougie on 07/11/2017 - 23:48

        Did you say she will be living with you though? It may have been part of the process of "another person, another support for this loan" process

        She has her own place and wont be living with me yet anyway. She is a liability if i put her down on the loan I would be the one with less capacity to borrow.

• 

  Diji1 on 07/11/2017 - 00:04

  +9

  main difference is our educational circumstances, work experience and relationship status.

  So you aren't in fact in similar circumstances at all.

  • 

    CyberMurning on 07/11/2017 - 10:21

    yeah kind of pointless post really. YMMV

• 

  garetz on 07/11/2017 - 00:40

  +4

  Banks consider someone with a degree can have a much higher potential to earn in the future. Someone without a degree, like a tradie must show they are making more money now, as they consider future earnings to not increase but stay stagnant.

  • 

    [Deactivated] on 07/11/2017 - 02:01

    +1

    Echoing this. While you're on similar money and in similar financial situation, by the banks stats you're a safer bet with a larger loan because you have a degree. There may be other subtle differences you're missing though. eg: You might have a better credit score than him.

    Had a similar oddity when I was newly graduated. Myself and a friend (same degree, same job, same age, started work on the same day, same pay, same debts) applied for car loans at the same time of similar value (less than $1k difference). She was rejected multiple times. I got my loan/Lease approved the day I applied. Don't know why. Who knows whats on their books about you. Credit scores can have all kinds of bullshit in them.

    • 

      garetz on 07/11/2017 - 02:13

      Credit scores are important when considering credit card applications, not so much property loans. for property loans , the most important thing they look at is can you service your debt. With credit cards, they do not care if you can service your debt, in fact they prefer you didnt, so interest accrues. Car loans again are a totally different criteria basis, you think all credit availability is the same, a loan is a loan, but that is not the case. Some lenders have a higher appetite for risk in different asset classes, so may lend you more. In your story, she may have had significant credit card debt, or missed a bill payment, you just dont have all the information required to make a comparative assessment.

      • 

        [Deactivated] on 07/11/2017 - 02:19

        "you just dont have all the information required to make a comparative assessment", was sort of my point re: the OPs post. But cheers for the extra information re: credit scores.

      • 

        itsdougie on 08/11/2017 - 00:17

        @polk: what do you want to know?

    • 

      sagrules on 08/11/2017 - 16:52

      I agree with this, I would contact Veda and get a free credit report. My partners one had some incorrect information that needed to be updated as this would've impacted his loan application. Also, it registers every credit card you ever applied for and from doesnt show whether the account has been closed or not, so hence less lending capacity. Banks use reports like this to assess your loan serviceability.

• 

  dufflover on 07/11/2017 - 07:50

  +1

  Not really related to the original question (people already covered my thoughts above re: the degree and potential backup earning power), but I didn't really care too much what the banks said I could borrow because every single one gave me a ridiculously high number. This was before the whole tighter regulations and stuff, but still can't imagine anyone thinking it's a good idea to go anywhere near the maximum a bank is willing to lend you, even 30% off that was crazy high.

  • 

    HighAndDry on 07/11/2017 - 10:33

    +1

    Depends on the market, your risk appetite, and what you're borrowing for. For example (only!) I can easily see the value in borrowing even $100k more if it meant that you could buy a safer investment property much closer to the city as opposed to out in the far far south-west boondocks, because it'd mean much safer future capital gains, easier and higher rental returns (generally), etc.

    • 

      itsdougie on 08/11/2017 - 00:02

      Living at home has been great for saving money but its time to leave the nest and find my own place. Just so happens my friend who i have known for a long time is keen to do the same but without the ability to fund his own property it seems I'll be buying my place and he'll have to rent a room off me.

• 

  CyberMurning on 07/11/2017 - 09:24

  the luck factor is not the same

  • 

    tabz on 07/11/2017 - 10:10

    +2

    OP has a lucky face.

• 

  Tech5 on 07/11/2017 - 10:53

  +4

  We are in the same circumstances except for just about everything important. What

• 

  John Kimble on 07/11/2017 - 17:46

  So not the same thing but reminds me of these ads from a while back.

  https://youtu.be/dVoaj0Li1GQ

  BTW, what jobs do they have to be on 200k at 21???

  Oh, it's just a remake bahaha

• 

  MadgeH on 07/11/2017 - 21:00

  Hi Op,

  Borrowing capacity is purely based on how much you can "afford" to borrow. This is determined by your income vs expenses and debts (including rent payable, how many people your income supports etc.) If the above is the same with both of you, then your affordability should be identical.

  Getting that loan approved is another matter. This will depend on different factors including credit history, length of tenure with employer, assets, deposit amount and others. This can differ between one person and another.

  Different banks also have vastly different policies and appetites for lending nowadays.

  I hope this helps

  Hass

  • 

    John Kimble on 07/11/2017 - 21:10

    Different banks also have vastly different policies and appetites for lending nowadays.

    First paragraph

    I have a childhood friend who went to the same bank and home loan manager as I did, our borrowing capacity is substantially different. I can borrow about 30% more than he can.

    • 

      MadgeH on 07/11/2017 - 23:46

      Thanks. Refer to my first paragraph.

  • 

    itsdougie on 07/11/2017 - 23:55

    We are purchasing 2 identical properties, left overs from a development of which we know the developer. When we went into the bank we thought it would be as easy as pea. For me it will be as I have the capacity to borrow what is required, for my mate he will fall short and is finding another way to raise the required amount or pull out of the deal.

    He has certainly worked a lot longer than me and he is a gun, I actually thought it would the other way around and he would be able to borrow more especially when he has more savings.

    I actually have more outgoings, I go on holidays much more frequently, gym, services etc. Neither of us have loans for anything else. TV, laptops etc all purchased outright. I wouldn't have thought we would have much of a credit rating as we don't have things on loans.

• 

  [Deactivated] on 08/11/2017 - 00:19

  +1

  Our guess is that the difference is likely to do with declared living expenses.

  Why? Most banks, if they are following recent guidance from APRA and the credit assessor is doing everything completely by the book, are required to use the actual expenses declared by the applicant and/or evidence from bank statements regarding the applicant's expenses (the latter typically not being an issue unless there is evidence of something major such as significant gambling, for example).

  For reference, in times past, standardised models (such as HPI) were commonly used in place of assessment to do with the declared expenses & transactional history. These days, models can still be used to describe discretionary spend but they are more used to set bare minimums in the absence of a reasonable declaration of expenses by the applicant and in the absence of transactional history that may suggest the applicant has financial problems.

  NB: Educational achievement is rarely used by credit assessors outside of the following areas:

  1. Where there is highly specific policy granting concessions to certain types of degree holders - think primarily "medico" field degrees. There are also some concessions associated with accounting and law graduates that also take into account their income and years of experience.
  2. Determining whether a weak application or an 'alternative verification' loan is likely to be declined. If a person's employment history is weak but otherwise in a grey territory of possible approval, then qualifications may play a part in the assessment. Similarly, for 'alternative verification' loans (which are an evolution of the 'low doc' loan), lenders look to the circumstances of the applicant to determine whether their claims to do with income are bogus (NB: they will also look to find cash flows in bank statements). How might assessment differ between a specialist doctor and a house cleaner in this respect? Simply put, it may not be unusual for a specialist doctor to make $400,000+ per annum. It would be somewhat odd to see a house cleaner making that kind of annual income. The check or balance here to stop highly qualified people from claiming ridiculous figures based upon industry averages is that it would be extremely unusual to see a specialist doctor with largely cash based revenue (i.e. bank statements missing 90% of the claimed income).

  Hope this helps.