10 Feb Four Reason You Might Get Your Home Loan Rejected
The lending environment continues to be incredibly tight and despite record low interest rates, getting your home loan application approved still takes plenty of work.
In recent years, lenders have started to take a very close look at an applicants credit rating, their income and type of employment, their ongoing monthly expenses and more recently, even the industry you work in.
The first step to ensuring you are on the right path is to talk to a mortgage broker in Melbourne as they will be able quickly assess where you stand and help navigate the issues that can come up during the application process.
Here are four reasons your home loan might get rejected.
Patchy Credit History
It’s important to remember, that banks and lenders only want to lend money to someone who they believe will be able to pay them back. The way a lender is quickly able to assess the likelihood of that occurring is to look at how you’ve handled credit in the past. For the most part, your credit history will tell them a lot about you.
If you have a patchy history, that has been littered with defaults or worse, then the odds of you being a model borrower in the future are low. Therefore there is a good chance you will get rejected.
By speaking to a mortgage broker in Melbourne, they will be able to access your credit file and also work with you to try and repair it prior to applying for finance.
Your Employment History
If you’re trying to get a regular home loan, lenders like to see a steady history of employment. If you’re new to the workforce, then they like to see at least six months in the same job.
If you’re self-employed, they ideally want to see at least two years of you operating your business successfully.
If you haven’t been in your job long enough, you might be rejected by a lender, however, your mortgage broker in Melbourne might be able to help you with different types of loans that require less evidence of income.
Wrong Type of Property
Even if you have all your financials in order, your application can still fall apart at the last minute after the lender has seen the property you intend to buy.
Generally speaking, lenders don’t like to lend for unique properties or properties that they will have a tough time selling if they had to.
A lender wants to first know that you have the ability to pay them back, but in a worst-case scenario, they will want to be able to sell the property to recover any money owed to them. A unique property (like a hobby farm) is not easy to sell and therefore might not be something they are prepared to lend for.
Speak to a mortgage broker in Melbourne, prior to putting in an offer on the property that you are looking to buy and they will be able to give you a good indication as to whether you will be able to get finance. Alternately, you might still be able to purchase the property, but could require a larger deposit.
Borrowing Too Much
While we know that it is possible to borrow 90-95% or in some instances even 100% of the value of a property, in the eyes of a lender, this is a high-risk loan.
Lenders generally like to see a 20% deposit as this offers them a degree of protection, should the property market fall.
At the same time, the fact that you’ve been able to save a 20% deposit suggests that you are someone who can manage your finances well.
Again, speaking to your mortgage broker in Melbourne ahead of time and ideally seeking a preapproval, will clear up just how much you can borrow and ultimately how much you can spend on a property, based on your current financial and personal situation.