It is not uncommon to be declined by a bank for a home loan application. Have you been told you’ve been declined, or to try again in a few months time?
Many people are often stunned by thus, however the good news is that there can often be solutions, including using alternative finance providers such as non bank lenders. Not all banks or lenders are the same, so a decline with 1 or 2 providers does not necessarily mean a decline elsewhere. It’s usually important to understand about possible reasons for declines.
Too many overdrafts
Having too many overdrafts, e.g. unarranged overdrafts, can scream alarm bells to some banks. Even though you have some savings, or stable jobs; your bank account having several overdrafts can be bad news and make it seem that you are a risky candidate for a bank to extend a home loan to.
Solution: If you have too many overdrafts, you can consider speaking to a financial adviser or mortgage broker. They may be able to offer you an alternative option or present your case to another lender or bank that is not so particular about this. You can also consider budgeting and revisiting the situation in a few months time with better account conduct.
Bad credit can mean that in the past you have had trouble paying back loans or bills, or not paying them on time. It is often important to understand the severity of the bad credit, and it would be worth seeing about getting a copy of your credit file.
If the bad credit was for a small amount of money, and was some time ago, it may be possible that the lender or bank you had applied to had strict rules around this, and other lenders might be okay with it. It could be worth talking to a financial adviser or mortgage broker about your alternatives.
Unacceptable property types
Sometimes, applying to a certain bank, may be problematic where that bank is not that interested in lending for your type of property. For instance, terraced houses, townhouses and apartments can be harder to get a home loan for, compare979631d to a freestanding house. Some lenders or banks are better when dealing with different property types, so consider speaking to them.
Use a mortgage broker or financial adviser
A suitably qualified mortgage expert can help talk you through your options. There are often more options than you may realise at first sight. Unfortunately sometimes people make the mistake of thinking that if one bank declines them, there are no other options, or they lose hope. Instead, consider that a financial adviser or mortgage broker has almost a ‘menu’ of different alternative lenders and options.
Not enough deposit
Some banks or lenders have higher deposits than others. For example, some lenders are only comfortable with 15 to 20% deposits. In other cases, some lenders are willing to entertain a 10% deposit, or even a 5% deposit in rare circumstances. Different banks or lenders have different requirements around this. Some lenders are more willing to accept lower deposits than others.
Too many personal loans or credit cards
Sometimes a bank might not like the idea that a person has too many debts, such as personal loans or credit cards. A suitably qualified financial adviser may be able to guide you through the next steps around this and what some possible solutions might be for your situation if you really want to get a home loan.
Unstable employment or recently self employed
Some banks may take the view that you have unstable employment, especially if you have only recently gotten a job, or work casual hours. They may also be concerned if a person has a history of short employment periods.
High level of personal expenses
Some banks may decline a person if they have a high level of personal expenses. Too much money spent on things like eating out, drinks and entertainment, can be problematic. A financial adviser may be able to discuss your options with this and what could be done.
Many people are eager to know what their alternative next steps may be, and how to deal with this. For more information, consider speaking to a financial adviser. A financial adviser can help see if there are alternative ways for you to get a home loan, such as using alternative lenders, non bank lenders, or a different bank.