One of the most disheartening prospects a home buyer faces is rejection. First there’s the possibility that the offer they put in on their dream home or ideal investment might be declined and of course, even more soul destroying, the chance that the banks will leave them high and dry with no money to even make a deal in the first place.
As we witnessed during the 2008 global financial crisis, when the world economy starts to show significant cracks, lenders get nervous. Their lending criteria becomes more stringent and they seem to want every last detail of your life story before even glancing at your home loan application.
So what are your options if the first bank you approach responds with a big fat “No deal”? Well, before you give up hope, it’s important to remember that old adage – if at first you don’t succeed, try and try again!
In today’s market the borrower can often hold the upper hand if they just know what approach to take with lenders. You see, there are not too many people scrambling to take on a new mortgage right now and the banks know it. They want business and they’re willing to compete to get it.
Investors take note
One of the big issues for investors who are asset rich but cashflow poor, is convincing the banks to give you more money to continue growing your portfolio. Then there are investors who run their own business and due to their self employed status, face numerous obstacles and often encounter outright rejection from the banks, even if they already own property worth millions of dollars.
If you know you’re a good bet, with the capacity to meet your mortgage commitments and enough security to make you a low risk prospect for the banks, persist in finding a lender who will also recognise these positives. They are out there.
The take home message is don’t give up! No matter how despondent you might become or how frustrating it might be, keep looking until you find a lender who suits your needs, budget and risk profile.
Of course you also need to ensure you have a clean slate when it comes to your credit file, as this can sometimes unearth issues regarding your financial status that you may not have even been aware of. If you find out that you’ve been rejected due to a black mark against your credit history, find out what the default is and try to rectify it before making any further applications.
One of the ways you can determine if there is an issue with your credit report is by asking the lender why they declined your application. Even if it wasn’t a glitch on your credit rating, at least you will have a heads up before you approach any other banks and can hopefully address the problem.
Sometimes the difference between a yes and a no can be as simple as a credit card debt of $2000 or the total of your credit limit – which is also a factor the banks consider when processing your application. Ideally, you should clear the debt and reduce your credit limits prior to trying again with another financial institution.
You also have to make sure you’re being realistic about what you can afford to borrow. No lender in their right mind is going to qualify you for a home loan that you obviously don’t have the capacity to pay back. There are numerous on-line repayment calculators around today, so it’s simple to do a quick check and make sure your expectations match your finances.
Finally, ensure all of your paperwork is up to date and accurate and make the lender’s job of processing your application as easy as possible by providing all of the necessary documentation in a timely manner and being readily available to answer any questions they may have.
If you feel you have exhausted all options and simply cannot handle any further rejection from the banks, perhaps you could consider engaging the services of a good mortgage broker. Generally, with our knowledge of the industry and the various boxes the banks like to be ticked, we can set you on the right path from word go and as long as you can afford it, there’s no reason an experienced professional should have any difficulty getting the banks to say yes.