During a home loan application, a mortgage broker plays a crucial role in liaising with the lender to ensure the borrower’s financial position meets approval requirements. A credit assessment is one of the most critical parts of this process, where the lender evaluates the borrower’s financial stability, creditworthiness, and ability to meet loan repayments.
Brokers act as an intermediary, ensuring the lender has all the required information while advocating for the best possible outcome for their client.
Key Areas a Broker Discusses with the Lender During Credit Assessment
1. Borrower’s Credit Score and Credit History
The lender will assess the customer’s credit score, looking at past debts, repayments, defaults, and any missed payments.
The broker may discuss how previous credit issues (such as a late payment or a small default) can be mitigated, especially if the customer has a strong recent repayment history.
If there are credit report errors, the broker may request clarification or corrections before the assessment.
2. Income Verification and Stability
Lenders require detailed proof of income sources, including:
Salary or wages (via payslips or tax returns).
Self-employed income (via financial statements and business records).
Rental income (if the customer owns investment properties).
Bonuses, overtime, or commission earnings.
A broker may discuss income consistency and stability, particularly if:
The borrower has variable income (such as casual work, contract roles, or fluctuating commissions).
The borrower has recently changed jobs, requiring additional clarification.
The borrower is self-employed, where alternative documentation like BAS statements or accountant letters may be needed.
If necessary, the broker may present supporting documents to strengthen the application.
3. Existing Debts and Liabilities
The lender reviews all existing financial commitments, including:
Personal loans, car loans, or credit card debts.
HECS/HELP student loans.
Buy Now, Pay Later (BNPL) obligations.
Existing home loans or investment property mortgages.
A broker may discuss:
Debt consolidation options to improve borrowing capacity.
Strategies for reducing credit card limits or closing unused facilities to strengthen the application.
How certain liabilities are being managed, especially if recent repayments show financial discipline.
4. Living Expenses and Spending Patterns
Lenders now conduct a detailed review of a borrower’s living expenses to assess affordability. This includes:
Rent or current mortgage repayments.
Utility bills, groceries, and discretionary spending.
Childcare, education costs, and dependents’ expenses.
Subscription services and entertainment.
A broker may discuss:
How temporary high expenses (such as a recent holiday or wedding) do not reflect ongoing financial commitments.
Whether the borrower can adjust spending habits to improve affordability.
Clarifications for high discretionary spending that may require explanations to the lender.
5. Loan Structure and Interest Rate Options
The broker and lender will also discuss the best loan structure for the borrower’s situation. This includes:
Fixed vs. variable interest rates – Based on the borrower’s preference for certainty vs. flexibility.
Loan terms – Whether the borrower wants a shorter loan period or a standard 30-year loan.
Offset accounts and redraw facilities – If the borrower wants to reduce interest over time.
Repayment options – Whether they will pay principal & interest or interest-only (common for investors).
If the lender sees the borrower as higher risk, the broker may negotiate a better structure to improve approval chances.
6. Deposit Size and Loan-to-Value Ratio (LVR)
A key discussion is around how much deposit the borrower has and whether Lenders Mortgage Insurance (LMI) applies. The broker may:
Confirm if the deposit source is acceptable (genuine savings, gifts, or government grants).
Discuss LMI waivers (e.g., for medical professionals or high-income borrowers).
Negotiate a lower LVR if the borrower can increase their deposit to avoid LMI costs.
7. Special Circumstances and Loan Justification
Not all borrowers fit into standard credit assessment criteria. A broker advocates for their client if they have unique circumstances, such as:
A strong rental history replacing the need for genuine savings.
Temporary career gaps due to maternity leave or study.
Past credit issues that have since been resolved.
The broker’s ability to present a strong case can be the difference between approval and rejection.
Conclusion
The Broker’s Role in Credit Assessment
A mortgage broker does more than just submit loan applications—they actively engage with lenders, ensure all financial details are correctly assessed, and present the borrower’s case in the best possible light. By managing lender discussions, mitigating risks, and structuring loans effectively, brokers significantly increase the chances of a successful home loan approval.
For borrowers navigating the home loan process, having a broker ensures they are well-prepared for credit assessment and maximises their loan approval potential.
