Whether it’s your love life or your home loan application, no one likes getting rejected. There are many reasons why it could happen, and some can come as a big shock. So today we’ve outlined five surprising reasons to help you avoid home loan heartbreak.
There are few words would-be home buyers dread more than: “your home loan application has been rejected”.
It can feel like a real kick in the guts. And some of the reasons can be surprising.
A rejected loan application can hold up your home-buying plans and could have a negative effect on your credit score. So it can be important to avoid this scenario.
Below we’ve outlined five reasons your next application could be rejected – so you can start heading them off now.
1. Spending too much or too little
Most people know that spending too much is a major red flag for lenders. So limiting your unnecessary expenses is important.
But drastically slashing costs and living a very meagre existence can also be a concern.
Lenders can see this as unrealistic and unsustainable, and they can remedy it during assessment by applying the household expenditure measure (HEM) instead.
HEM is a standardised benchmark used to estimate annual living expenses. And if your standard, reasonable budget is on the super savvy frugal side, there’s a chance HEM may be higher.
2. Credit cards
Having multiple credit cards and performing several balance transfers can affect your application.
Every time you apply for credit an inquiry is logged on your credit history. And lenders will likely take notice.
Even your “just in case” credit card can have an impact. You may need to prove you have the means to pay off the limit within three years, even if the balance is $0.
3. By now pay later services
‘Tis the season for shopping. And buy now pay later (BNPL) schemes will be rolling out the red carpet.
But it might be worth resisting the temptation.
The Australian Prudential Regulation Authority (APRA) amended its framework this year to include BNPL debts in the reporting of debt-to-income (DTI) ratios.
Lenders will likely include BNPL debt in your DTI ratio to see your total debt in relation to your income. And a high DTI can result in limited borrowing capacity or even rejection.
4. Credit history
Your credit history is a finicky thing.
Even a few late payments can cause your credit score to drop. So it’s important to make sure your bills are paid on time.
Also, applying for too many credit cards or other loans can impact your credit score, and therefore your home loan application.
And with increasing news of scams, data breaches, and identity theft … it’s a good idea to check your credit history health.
You can request a free credit report once a year from one of three national credit reporting bodies which are listed on this government website.
5. Your type of income
Your type of income could make or break your application.
Lenders typically favour traditionally employed applicants with a steady and reliable income.
Many lenders consider self-employment carries a greater risk for less consistent income, and some can reject applications on these grounds.
So if you’re self-employed, when applying for a home loan it’s important to target lenders who are more open to lending to small business owners (we can give you the down-low on this).
Also, word on the street is that tax debt is increasingly becoming an issue for self-employed applicants. So if you have a large tax debt, it might be worth getting on top of that if you can.
Get in touch
If you’re not the kind of person who likes being rejected, well, the good news is that we’re not the rejecting type.
We’d love to have a chat about your home-buying dreams to see if we can match you with the right loan and lender for you.
Contact a Sydney mortgage broker for personalized loan solutions. Gain expert advice, access to diverse lenders, and streamlined loan processes.
Following are 10 reasons you should contact us:
Engaging a mortgage broker in Sydney can be a wise move if you’re considering obtaining a loan for various reasons. Mortgage brokers serve as intermediaries between borrowers and lenders, offering a range of advantages that can greatly simplify and enhance your loan-seeking journey.
1. Expert Guidance:
Mortgage brokers are well-versed in the intricacies of the lending industry. They can provide you with valuable insights into the current market conditions, interest rates, and loan options tailored to your financial situation and goals.
2.Access to Diverse Lenders:
Brokers have access to a wide network of lenders, including banks, credit unions, and non-bank financial institutions. This means they can present you with a variety of loan products and help you find the best match for your needs.
3. Customized Solutions:
Brokers take the time to understand your unique financial circumstances, long-term goals, and preferences. With this information, they can recommend loan options that align with your objectives, whether it’s purchasing a home, refinancing, or investing.
4. Time and Effort Saving:
Researching lenders, comparing loan terms, and completing paperwork can be time-consuming. A mortgage broker streamlines the process by doing the legwork for you, saving you time and reducing stress.
5. Negotiation Power:
Brokers often have strong relationships with lenders, which can give them negotiation leverage to secure favourable terms on your behalf, potentially resulting in lower interest rates or reduced fees.
6. Complex Situations:
If you have a complex financial situation, such as self-employment income or credit challenges, a mortgage broker can guide you through the options available and help you find lenders who are more accommodating.
7. Detailed Analysis:
A broker can provide you with a comprehensive analysis of the costs and benefits of different loan options. This empowers you to make an informed decision that aligns with your financial well-being.
8. Personalized Support:
From application to approval, a mortgage broker offers continuous support, answering your questions and assisting you throughout the entire process.
9. Regulatory Knowledge:
Mortgage brokers are familiar with the ever-changing regulations in the lending industry. They can help ensure your loan application meets all necessary requirements.
10. Minimized Hassle:
With a broker, you’re not alone in navigating the loan process. They guide you through paperwork, ensure deadlines are met, and facilitate a smoother overall experience.
In the end, reaching out to a mortgage broker in Sydney can be a strategic move to simplify the loan-seeking process while maximizing your chances of securing a loan that aligns with your financial goals. Their expertise, access to diverse lenders, and personalized support can ultimately save you time, effort, and potentially money.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.