When you are applying for a home loan you need to ensure that the application is presented to answer all a lenders questions so they really have no option other than to approve it for you.
That’s what experienced mortgage brokers are good at.
Identify Any Problems First
It’s important that you do not rush an application, and especially if there are some problems that need to be explained.
You need to know what the lender will want to see, and know what would cause the lender to say “NO” as well.
Once you have established what might cause an issue with the application, you need to take the time to explain things in a manner that the lender can understand and accept.
Remember that what may seem like common sense to you, may be something that a lender cannot understand.
Some Common Problems
If you ask most mortgage brokers what problems they see on applications the list will be long.
There are a lot of “so called” problems that can easily be dealt with, and then there are some that need some extra consideration.
For many first home buyers some small issues with an application can seem to be treated unduly harshly by the lenders and this is often due to the lower deposits that are typical with people buying their first home. The lending policy with most banks is tougher when there is less than 20% deposit and often the application is looked at in more detail too.
Some common and “frustrating” problems are;
- Poor account conduct – you may have gone into overdraft without an arrangement, or gone over your overdraft limit and the lender says this is poor account conduct. In many cases this would have been something that you have done for years and the bank has always honored your transactions, so you thought it was okay.
- Cash withdrawals from credit cards – when you need some cash it is easy to withdraw money from your credit card. It’s something that the cards are set up to do, but the lenders look at this as bad cash management. They start saying that you are living beyond your means and it can be a battle to get a loan approved when there are cash withdrawals on credit cards.
- Low credit scores – the lenders will review your credit report and even though you may have no defaults, your credit score could be low. This is often the case if there have been too many enquiries or if you have had some of your regular bills that have been getting paid late.
- Bad credit – if you have had a debt listed as a default then the lenders are going to want to know why, and if the default was listed by another bank or financial institution then many lenders will decline your application.
- Irregular income – the lenders are looking for reliable income and therefore may scale or not consider income that is not regular.
These are only a few of the more common issues that mortgage advisers see.
Getting The Lenders To Say “YES”
When you put an application for a home loan to a bank (or have a mortgage broker do t his for you) the aim is to get the loan approval without too much stress.
You may have found your “perfect” new home, and then there is the stress of trying to get the finance approved.
When you are getting an application ready to present you are best to not hide anything, as most of the time it will be uncovered, and if the lender thinks you were trying to ‘hide’ something then they are not going to look favorably on your application. Remember that over the years many people have tried to deceive or defraud the banks and therefore they have a look of ways to check for discrepancies.
The best way to present an application is to highlight the problems, but then mitigate them so the lender can feel comfortable.
Why Lenders Say “NO” To Good Applications
There are a number of reasons why a lender might decline an application; however they often seen to say “NO” for what seems like very minor reasons. The lenders might highlight something which you had never considered would be a problem.
It is also important to be aware that it’s easier for a lender to say “NO” and get the application off their desks.
This can happen in particular either (a) when they are very busy or (b) when they cannot understand the reasons given to mitigate any problem.
You might want to “push” the lender for an answer, but be careful how hard to push as they may just say “NO” because they are too busy and find it easier to decline your application so they can get onto the next one.
You may have thought you have addressed some problem and explained it well; however possibly it was not explained in a manner that gave the lender comfort. It’s sometimes more about the way something is explained rather than what you thought you had said. Remember that your application make go through a number of hands and be assessed by a few different people so it needs to be written in a very concise manner.
Consider getting a mortgage broker to handle your application, but make sure that you choose a good one that is used to dealing with applications like yours.