“Loan Approved” are probably the sweetest words a home buyer can hear. But its not always the case. Some home loan applications get declined by a lender. Being declined for a loan when you think everything is alright is one the most frustrating and disappointing experiences of all when all you want is a simple loan to buy a home, an investment property and car or another asset.
Firstly the good news not every lender credit scores. If you need help applying for a mortgage please call us on 1300 885 244 or enquire here to find out which lenders you can qualify for.
Primarily it all revolves around situation, your credit score and your application and matching the right lender and mortgage or loan option from the right lender. Not all lenders are the same. Here we provide an overview of the main issues that affect a Mortgage application.
Your personal situation
- Employment: Generally you must not be on probation and must have been in your job for at least 6 – 12 months.
- Genuine savings: You must have 5% of the purchase price saved in a bank account if you are borrowing over 80% of the value of a property.
- Location: The location of the property you are using as security must be acceptable to the bank.
- Stability: If you move jobs or house frequently then the banks see you as unstable. This will reduce your credit score.
- Assets & liabilities: Your assets must make sense for someone of your age and income. If your assets are low or your debts are significant then your credit score will be low.
- More liabilities than assets: Most lenders will auto decline your loan as you are technically insolvent.
- Amount of unsecured debt: If you have a significant numbers of credit cards or personal loans, and if you owe close to your limit on those cards, then your loan may be declined.
- Industry: If you are employed in a fluctuating industry such as mining or construction, or are employed on a casual or contract basis then the lender’s credit score will be lower.
Your credit file
- Credit history: Your credit history is the largest single factor that can impact your credit score.
- Too many enquiries: Applying for several mortgages, credit cards or personal loans in the 12 months before applying for a mortgage is likely cause you to fail the bank’s credit score.
- No credit history: If you have never had any loans before then your credit file will be blank. This can be a high risk to the lender as you have not yet proven yourself.
- Bad credit history: If you have blemishes such as a default, court judgement, court writ, part IX or bankruptcy listing then your credit score will almost certainly fail.
- Internal credit history: Each bank has their own records of your accounts with them. If you have overdrawn your account or missed payments on a debt then this will reduce your score.
- Applied with current bank first: If you have already applied with your current bank and then you apply with another bank then you are likely to fail the second bank’s credit score. The second lender is concerned that there is something that they do not know.
- Not meeting normal bank policy: Banks have certain benchmarks in place, which if they are not met, will result in an immediate decline.
- Loan amount: Larger loan sizes are known to be a higher risk and so you need to be in a strong position to qualify.
- LVR: If you apply for a mortgage for 95% or 90% of the property value then your loan is a high risk.
- Inconsistencies: If your address history and employment history do not match what is listed on your credit file then the bank may lower your credit score.
- Incomplete application: If your application is incomplete then some lenders such as CBA will give you a lower credit score. Please try to include your drivers licence number, all of your assets and all of your liabilities otherwise you may be declined.
- Serviceability: The more excess income that you have, the higher your score. Refer to our ‘How much can I borrow?’ calculator for more info.
- Loan purpose: Some loan purposes such as refinancing, debt consolidation and equity releases are a high risk and so are credit-scored less favourably.
Do you need help with your home loan?
At Cashflow Recovery we know how the banks work, and can help you to apply with a lender that doesn’t credit score or who can accept your situation.
Please call us on 1300 885 244 or enquire online and one of our mortgage brokers will give you a call to discuss your options.