There are many reasons why a bank could potentially decline your mortgage application. Even after the big rejection from the bank a Mortgage broker could still help you secure your first home.
At Stephanie Murray Mortgages we deal with situations like this every day. It is the Mortgage Brokers role to make sure that every option has been explored to get you in to your home.
Here are some of the reasons the bank may decline your mortgage application and how a Mortgage Broker may be able to help you turn the no in to a yes!
1. Not enough deposit
Every bank is only allowed to lend a certain amount of funds over 80%. This is due to current LVR restrictions imposed by the Reserve Bank. It might quite simply be that the bank you have applied to does not have enough funds left in their “allowance” or their credit policy may only allow to lend to a certain percentage. This can vary from bank to bank and time to time. It is the role of your Mortgage Broker to know when and where this funding is available for over 80% lending.
Another option may be to have some assistance from family. This may be in the way of a gift. If a gift is not available it might be in the form of a guarantee from parents. This is when the shortfall of your deposit is made up from the equity in your parents home. Hence in this situation you will have a 20% “deposit” – not in cash but made up of equity.
2. Not enough income
You may have been told that your income does not service the amount of loan you are applying for. It is important to note that each bank has a different criteria for servicing debt and how much you may be able to borrow at one bank will be less at the next. Your Mortgage Broker will know which banks credit policy (requirements) will suit your individual situation. This will be dependent on any benefits you receive, whether you get over time, commission, bonus, casual work or self employed. Each bank varys in policy in all of these areas.
There may be ways in which you can cut back your outgoings in order to prove you can service (repay) a particular loan amount. This may be by repaying hire purchases or personal loans and canceling credit cards. It might be that if you use some of your funds to repay debt you will have less deposit BUT you will be able to service a higher loan amount due to your outgoings per month going down. This is something your Mortgage Broker will go through with you at the time of your interview.
3. Bad credit history
A poor credit history can wreck havoc on your loan application. In most circumstances there is a reason for why this has occurred. In some situations your Mortgage Broker can explain this to the bank and hopefully turn this in to an approval for you. In other cases your Mortgage Broker can look at a second tier provider to finance your property. Then when your credit history has been rectified you can look to refinance to a main bank. Everyone's circumstance are different and your Mortgage broker can see what is best for you for the time being and in to the future.
4. It just might not be your time!
The timing just may not be correct for a number of reasons. You have started a new job, you need to clean up your account conduct or you simply need to save more deposit (provided there is no other way around it). Your Mortgage Broker can start you on a plan to work towards the best time to apply for funding for your first home and be there to answer questions along the way.
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This information is general information only and must not be relied upon as legal advice. A disclosure statement is available here.