Having a mortgage declined can be frustrating, but a stop on the road to homeownership shouldn’t be the end of the journey.
Getting a mortgage is not always straightforward. So what to do if a lender says no? It may sound easier said than done initially, but if you make ‘determination’ your mantra, you’ll likely be pleasantly surprised at what you can achieve. It’s time to dust off the decline and get mortgage-ready with these tips.
Finding out that your home loan has been declined can be disheartening, but it doesn’t have to be the end of the road. If anything, why not use it as an opportunity to give your financial life a fresh start?
One of the first things to do is find out what needs to be fixed. Insufficient deposit? High level of debt? Credit issues? Lenders decline home loans for a range of reasons, so the first thing to find out, is what they didn’t like about your application.
Don’t be afraid to ask the lender to fill you in on the detail. Give them a call and ask them to walk you through their decision. And don’t be shy if they use lingo you’re unfamiliar with – this is your opportunity to get some handy information, so ask your lender to drop the jargon and don’t get off the phone until you feel satisfied that you know where to focus your efforts.
Often a decline can come down to having too much debt already, for example credit cards or personal loans etc; or a blemish or two on your Credit Record.
Take a good look at your personal debt and if possible, make a plan to pay it off faster. And remember, lenders assess debt-servicing based on credit limits, not on your actual balance. So if you have a $5,000 limit on your credit card but have only used $2,000, it’s a good idea to look at reducing the limit.
Another ‘risk’ factor lenders take a good look at is your Credit Score and Record. What’s the difference between the two? A Credit Score is a number between 0 and 1000 that’s calculated based on a variety of factors like whether you pay your bills on time, if you have any defaults etc. A Credit Report is a history of bill payments, defaults etc and how much credit you have.
How long has it been since you checked yours? If it’s been a while, or forever, you might like to have a look at online tools like Credit Simple: you could have your score in as little as five minutes, free of charge.
Transparency is key, and while the idea of finding out your score might be uncomfortable, it’s crucial information to have when getting mortgage-ready. We can only change what we know, right?
Just because one lender has rejected your application, it doesn’t mean all lenders will. Some like to take a ‘tick-the-box’ approach to borrowers; others – like RESIMAC – understand that everyone’s circumstances are different and take a more 360 approach when looking at home loan applications.
If you’ve had a credit hiccup in the past or are self-employed for example, you may find that talking to a different lender delivers a more positive response; or at the very least, will give you more information about how to boost your home loan chances.
Armed with why your home loan was declined, you’ll be in a much stronger position to change the outcome next time you apply. In a nutshell, know what needs to be fixed, make a plan and add a healthy dose persistence. Keep the question – what can I do to be mortgage-ready – top-of-mind, and with a bit of time you’ll be ready to make your home ownership goals a reality.
And remember: if you’d like to learn more about your options, our Lending Specialists at RESIMAC Direct look forward to hearing from you. We’re experts in helping Kiwis overcome barriers to home ownership.
See if you qualify. To get a more accurate idea of how much you can borrow with RESIMAC Direct,