Having your home loan application declined can be a massive kick in the guts. Unfortunately it is a reality that can happen.
You can prepare yourself by taking note of these 4 common reasons for decline.
SERVICEABILITY
This is your ability to repay the loan based on your stated income and expenses.
Each lender uses a different method to calculate your serviceability. Just because you had a $500,000 loan with ABC Bank doesn’t mean you can get the same with XYZ Bank.
Your broker can help you find the lender that has an income policy most favourable to you.
SAVINGS
It’s common knowledge that you need to kick in some savings when buying a home, with a minimum deposit of 5% considered standard.
But do you know what ‘Genuine Savings’ is? It’s quite common for lenders to require this 5% deposit to be classified as ‘genuine’.
Genuine savings means savings accrued or held for at least 3 months. Some lenders will waive this requirement if you can prove Genuine Savings in other ways, like a rental ledger.
CREDIT SCORE
Poor Credit History, like late or missed repayments will play a large part in your Credit Score, but a lot of people are unaware of the other factors that contribute to this score.
They can include employment history, residential history and number of credit enquiries. If you have changed jobs and moved house often, or have a lot of credit enquiries this can lower your score.
SECURITY PROPERTY
You might be buying your dream home, but the lender might have different ideas!
Lenders have security policies which govern what type of properties they will accept. Potential issues can include; postcode restrictions, minimum apartment sizes, maximum land sizes, proximity to power lines, heritage listing, or property requiring essential repairs.
Any one of the above issues can result in your application being declined which is why it’s so important to work with your Mortgage Broker to put your best application forward.
