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After months of searching, you’ve finally found the right property and the home loan you need to make the purchase.
All you need is your bank to come on board and offer you a loan. However, much to your dismay, your home loan application is rejected.
Not only can a rejected application prevent you from getting your ideal home, it can also stay on your credit file and hurt your chances of having future loan applications approved.
So let’s take a look at some common reasons why lenders refuse home loan applications as well as what you can do to ensure your application is approved.
Each lender imposes its own lending criteria on the mortgages it offers. These criteria are in place to ensure that every borrower the bank loans money to will be able to service the loan and does not pose an unacceptable level of risk of defaulting on their mortgage.
Some common reasons why lenders reject loan applications include:
Having your application rejected can be disappointing, but there are plenty of steps you can take to boost your chances of approval next time you apply for a loan.
Many loan applications are referred for manual assessment, and this could be for a variety of reasons. It could indicate that your loan application contains some intricacies that require a second look. It could mean that the lender requires some extra documentation. It could merely mean that the lender you have chosen sends applications for manual assessment as a part of their standard credit assessment process. What it does not necessarily mean is that your loan application will be rejected.
If you see your application has been referred for manual assessment, the best course of action is to remain patient and wait for further communication from your lender. If manual assessment does lead to your application being rejected, speak to your mortgage broker about what further steps you can take.
If you didn’t have a broker in the first place, it might be wise to enlist their help once you get your first rejection. They can work with you to make sure you’re presenting all your information in the best possible light and also help steer you in the direction of a lending institution that you might give you a better chance of getting your loan across the line.
Mortgage managers offer you a boutique style service – where they’ll represent you for the duration of your loan, not just during the application process that mortgage brokers help out with. They organise funding from a variety of sources and are safe as they do not lend their own money.
The absolute safest course of action is to wait six months, get your finances in order and reapply. Avoid applying to another lender immediately after you've been rejected as this can have a negative effect on your credit file. Instead, try to pay down existing debts, save a larger deposit and reapply once you're in a better financial position.
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