Finding out that your home loan has been declined is never a good feeling, but don’t despair – all lenders are not created equal, and just because one bank has said “no deal” it doesn’t mean you should give up just yet.
If your mortgage application has been declined, don’t get disheartened, says Mark Walker, mortgage broker with YourShare.com.au, a home loans team that rebates their clients the trailing commissions paid to them each year from banks and lenders.
Instead, he recommends that you re-group your documentation and apply again. “All lenders are different and actually have quite different lending requirements,” he explains. “I know of a family who owned a millions of dollars worth of investment properties, but were declined by banks numerous times purely due to being self-employed. After a few applications with various banks, one particular lender took a closer look at their property portfolio and realised they were good for the money!”
If you are on the receiving end of a dreaded loan decline, Walker offers the following advice.
1. Don’t give up
“The journey is never over until the keys to the right place are in your hand,” he says. “Always try again – there will be a lender out there that is matched to your needs and budget.”
2. Reality check
Make sure your expectation of what you can borrow is realistic and that you can actually afford the repayments. Check out loan repayment calculators such as those found here
3. Ask the lender why your loan was declined
“This is key in understanding what needs to be fixed for the next application,” Walker says.
4. Review your credit card debt
If the problem is simply a case of missing out on the loan due to having $1,500 on a credit card, or even just having $1,500 too much on your actual limit of your credit card, then that should be an easy fix if you have some savings or a regular salary. Walker recommends that you clear the debt, reduce the limit of your card, and cancel the card altogether if you don’t use it.
5. Check your credit profile
“If you have a bad credit report you may not even know about it until your application has been rejected by the lender,” he says. “If your declined loan application was due to a credit default, then you’ll need to know that for next time and see if you can solve it or dispute it before applying again.” Check that the statements and bills you provide to the lender contain no arrears or overdue payments and if flaws are present, then make sure you are prepared with a good explanation.
What can you do to boost you chances of being approved next time?
- Make sure that all paperwork provided is up-to-date. “Most recent payslips, not three months ago,” Walker says.
- Clear any credit card debt you can before applying again.
- Make it as easy as possible for the lender to process your application by checking that what you have provided in paperwork (such as payslips, which include income and overtime) match what you have claimed you earn on your initial application for the loan.
- Check your credit file at websites such as www.mycreditfile.com.au and if there is something on there you did not expect, then see if you negotiate it to be removed or adjusted.
- Use a broker rather than going direct to a bank. “Brokers can negotiate with lenders for applicants and will be able to warn applicants upfront before they submit an application if there are any potential issues, to avoid being declined in the first place,” Walker says. “A broker can also source the best lender available in relation to your circumstances, and they know their way around the different lending criteria each lender has.”
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