Your Application to Get a Homeloan Has Been Declined – What Now?
Part one of our series of tips for people who want to get a homeloan we looked at the criteria that banks need to tick off before an application will be considered. This week we look at a few of the reasons why people are disqualified from loans. Mortgage Brokers like Holmans McGregor generally take the reasons for disqualification into consideration when preparing an application – providing the best possible chance of a successful outcome. Therefore it is essential applicants are upfront and honest with their broker.
1. Lenders are guided by a borrowers track record – which can be problematic for people who have been out of the workforce to care for children, or are on a probationary period of new employment. Lenders will often knock back applicants who have had several jobs over a 2 – 3 year period. There are some providers who are more lenient in these matters than others.
2. The lenders must be satisfied with the property that is being offered as security – they will want to recoup their funds in the event of a problem, so are interested in a property’s ‘limitations’. This is regardless of ‘potential’. For that reason, average homes in suburbs where demand is steady will be more appealing to a lender than a home in a mining town, for example, which some banks continue to view as ‘risky’. It also means lenders are more wary when it comes to student accomodation, holiday houses, boarding houses, serviced apartments and some rural areas. It comes down to the ‘future demand’ probability. As a result, those types of loans as a rule are restricted on the LVR’s.
3. People are often disqualified from a loan because they have no track record of saving – even if it appears they can easily afford the loan. Lenders like to see a degree of financial responsibility for serviceability.
4. A borrowers credit record is a very common reason for a loan rejection. If a borrower has applied too many times over recent years, it appears on the credit record ( CRA ) and the application will be automatically rejected. This is aside from the scenario where applicants might have a bad credit rating – problems in the past are a ‘red alert’ for lenders as they indicate ‘problems in the future’. Many people have been caught in the trap where they have shifted, missed a bill payment, been reported to the CRA and are unable to obtain finance. One client became involved in a dispute with a telco over a faulty phone on contract and was reported for non payment. If this sort of situation applies to you is is wise to seek advice on what to do from a qualified lender or broker.
5. Failure to Disclose – Apart from the fact that ‘tweaking the facts’ to get your loan over the line is illegal, lenders take a very dim view of applicants who misrepresent their circumstances – i.e forgot that credit card , inflated income etc. Once an omission is detected it creates more intensive checking on behalf of the lender and a full review of the application.
APPLICATION REJECTED – WHAT NOW!
Book a meeting with a broker to weigh up your chances of success with another lender. They may offer another means of proceeding towards obtaining that loan. Remember that first decline if it involves a mortgage insurer will apply to all lenders ( if the same insurer is approached again ). Most importantly, speak to the lender to find out why you were rejected. Look at your other options – do you have family in a position to help? Finally, take a breather, take the emotion out of the equation and analyse what you need to do to succeed next time – perhaps six more months of savings is not an impossible task.
Final Part Three : We will look at What Makes a Good Borrower in The Eyes of The Bank.