Overcoming Unstable Employment History To Buy First Home
First Home Buyer’s Success Story
Client at a glance
Mortgage Corp helped a young newlywed couple buy their first home despite some very challenging issues, which includes financing for 95% of the value of the home and wife starting a new job with a patchy employment history. Thanks to Mortgage Corp’s comprehensive loan application which painted a positive picture of their circumstances to the lender, this young couple was able to get their loan approval in time and move into their own sweet home!
Client: Joan and Jerry
Marital status: married, no children
Income: $130,000 combined
Occupation: IT support technician (husband) and HR assistant (wife)
Suburb of home: Reservoir, Vic 3073
Objective: obtain pre-approval for a 95% LVR loan to buy first home together, even though one of them had an unstable work history
Results: got the key to their very own home
Joan and Jerry were young newlyweds who were starting to look for their first home together in Reservoir, a suburb in Melbourne’s north. They were attracted to Reservoir as it was a popular area for families with median house prices of $782,500. Households in the area were averaged between $1,8000 – $2,400 per month on mortgage repayments.
Whilst Jerry had been working full-time for a number of years, Joan had been working part-time in retail in the last 3-5 years as she had been studying for her Masters in HR and had only just started working in her new role as an HR assistant.
As such, they only had a limited deposit so needed high loan to value (LVR) financing in order to secure a home in the area.
Median Sale Price for Reservoir 2014-2016
Recent Median Sale Prices for Reservoir and the Darebin Area for 2016
Sources: RP Data 2017
- They had a limited deposit so needed a 95% LVR mortgage in order to secure a property
- Joan’s patchy employment history, as well as the fact she was still on probation at her new job, would not look good to some lenders as they require evidence that the couple would be able to comfortably service the loan
We asked Joan about her employment history and she told us that:
- She had been working in a retail store for 3-5 years part-time whilst studying at university
- She had a period of 5 months where she was unemployed recently
- She had just started a full-time job in HR and was currently on probation
If Joan had walked into a bank branch or spoken to an inexperienced mortgage broker to apply for a loan, there would have been a high chance she would have been turned away.
Because a bank manager or an inexperienced mortgage broker would look at this information at face value and tick “NO” for the following basic lending criteria:
- Owns another property (x)
- Less than 95% LVR (i.e. the highest lending ratio) (x)
- The applicant needs to be in their current job for 3-6 months (x)
- The applicant must not be on probation (x)
- The applicant needs to have 2-3 years of relevant industry experience (x)
- The applicant must have 5% genuine savings (x)
They may also be concerned by her period of unemployment and wonder if her full- time job is actually stable. If Joan’s application had been submitted on the above facts alone, it probably wouldn’t sit well with lenders.
- Find a lender willing to approve their mortgage for 95% LVR to allow them to buy their first home
- Be able to show the lender that Joan and Jerry would be able to meet repayments on the loan going forward
Based on our experience, we knew that we would need to prepare a compelling loan application in order to get it over the line, as the facts weren’t favourable at face value. Whilst it was a joint application with Jerry, who had been in his job for a few years, Joan’s income was needed to get the loan over the line, so it was important to paint as best a picture of her financial position as possible to the lenders.
In the loan application, we explained to the banks that:
- Joan was working part-time in retail while studying an HR undergraduate degree and Master’s degree
- The reason she didn’t have a job for 5 months was because she was applying for jobs and attending interviews for jobs relevant to her degree
- She successfully managed to get a job in her industry and although she was still on probation, the probation period was only for 6 months and we requested a letter from employer stating all was in order for her to continue subject to completing the 6 month period.
Part of the reason we were able to get their loan approved was because Joan’s current job in HR was directly relevant to her university degrees. This helped show the lender that even though she was on probation at the time, had been unemployed for 5 months prior and previously had a job in retail that wasn’t related to her degree, Joan’s latest job had the potential to increase in earnings as she became more senior in her role.
- The couple were able to achieve their goal of buying their first home at $480,000.
- They are now thinking about starting a family and move onto the next stage in their married life.
- We’ll keep in touch to regularly check with them to see if they loan still suits their lifestyle.
Note: for privacy reasons, names used in this case study are not real client names.
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