With an expert on your side, you’ll have the insight you need to qualify for a great home loan. Find out what the advantages are of working with an experienced mortgage broker.
The Reality of Applying for a Home Loan Today
When you fill out a home loan application, the chances of qualifying and getting financing are not that high. One study found that only half of mortgage applications actually make it through to the funding stage.
That’s where a good mortgage broker comes in. An experienced broker will know all the nuances of every lender on their panel, which means they can make sure you apply with a lender who will be able to approve your loan.
That way, you can avoid the biggest misstep in trying to get a home loan – applying with a lender you won’t qualify with. When you apply for a mortgage and the lender denies your application, this in itself can make it harder to qualify the next time you apply.
Why Are Multiple Loan Applications a Bad Thing?
One of the most important factors that determine if a bank can lend to you is what’s listed on your credit file. Every time you apply for credit, it shows up on your credit history. Too many loan enquiries on your file is a red flag to credit issuers. Even if you are a responsible borrower, a lender will view multiple enquiries as a potential problem, which means they’ll be less likely to finance your mortgage.
This is why it’s also important not to apply with more than one lender at a time. Some borrowers make this mistake without realising how damaging it can be to their credit – the assumption is, if you submit three or more applications, you’re bound to qualify for at least one, right?
Wrong. Multiple formal applications instead will harm your credit, making it more difficult to qualify.
Instead of over-applying, the best route is to know you’re a fully qualified borrower based on a specific lender’s policies and criteria before you apply with them.
When you’re ready to start applying, you can fill out our online enquiry form for free. We’ll assess your situation, consider which lenders on our panel are the most suitable for you, and help you decide the right lender and the right loan product for you.
Get your free assessment from Nexus Money today – we’ll do everything we can to make sure you’re one of the loan applicants that does get approved. You can also call (07) 3146 5732 to speak with one of our mortgage experts.
Common Reasons Banks Deny Home Loan Applicants
Wondering why banks tend to decline home loan applications? Here are the main reasons why you might not qualify. Your mortgage broker can let you know if any of these issues could be a problem for you before you apply.
Income instability – It’s the lender’s job to verify that you can afford the loan. Half of being able to afford it comes down to what you earn in income. Banks will look for a stable income that’s high enough to cover your mortgage – which is why changing jobs before you apply can hurt your chances of qualifying.
Ideally, you’ve been in your job for at least six months and have worked in the same industry for over one year. If you’re self-employed, you’ll need two years of tax returns and other financials, or you’ll have to apply for a low doc loan, which will come with a higher interest rate. Also, with a low doc loan you won’t be able to borrow as much of the Loan to Value Ratio as you would with a full doc loan.
Interest-only loans – Recently, banks have faced tightening regulations by the APRA, the Australian Prudential Regulation Authority. One thing the APRA is encouraging lenders to do is to limit how many interest-only investment loans they offer. As a response, lenders have created more stringent criteria for interest-only loan applications – which means you may have an easier time qualifying for a principal and interest loan. Only apply for an interest-only loan if you can meet the extra strict criteria.
No genuine savings – One of the ways you can demonstrate financial responsibility is by showing that you regularly save. When you apply for a home loan, the bank will want to see that you have genuine savings – savings that you’ve been building with regular contributions over time. Without a solid savings history, your application could be denied, even if you have a deposit from another source.
High spending – When a lender assesses your loan application, they want to see a high enough income in relation to your monthly expenses. Even if you are a high earner, if you spend too much money each month, you may not pass the lender’s serviceability requirement. Serviceability is the money you have available to make your mortgage payments every month. To help your chances of qualifying, create a household budget and follow it – your lender will look at your bank statements to verify where your income is going and to see how capable you are of sticking to a budget.
Credit score – Don’t assume something as simple as a late credit card payment or an overdue utility bill isn’t going to be a problem. Anything that could drag down your credit score, from late payments on your credit file to applying for credit too frequently, can stop your loan application from going anywhere. If you can, take steps that might improve your credit well before you apply, such as lowering your personal debt, ensuring you don’t have any past-due accounts, and refraining from applying for credit.
Property value discrepancy – Before approving your loan application, the bank will do their own valuation of the property. If the value is much lower than the purchase price the seller is asking for, they may decline your application. To prevent this from happening, you can get an independent valuation before you apply. This way you’ll have a clearer idea of how much the property is really worth and you’ll know if the property value could make it impossible for you to qualify for financing.
How to Avoid Home Loan Application Pitfalls
There’s a lot to consider before you apply. A knowledgeable broker can assess your situation and let you know who you are likely to qualify with and which lenders might deny your application. We’ll tell you:
- The lenders who are likely to approve your application if you need an interest-only loan.
- Where you can apply based on factors like your savings history, work history, and deposit size.
- Which lenders have credit scoring policies that should work in your favour.
- The lenders that have complex lending policies that could impact your application – for example, some lenders rarely offer construction loans, whilst others have no problem with this type of loan.
- We can order property valuations with lenders so you’ll know how they’ll value your property and if the property value could be an issue – before you formally apply.
If there are any factors you should be aware of before applying or any steps you can take to improve your chances of qualifying, we’ll make sure you know about them.
A Look at the Complexities of Applying for a Home Loan
Unless you’ve worked for a bank, you may not realise just how complex the loan application process is. This is one of the reasons a lot of borrowers are surprised when their application is denied – they simply don’t know all the steps a home loan application has to get through in order to reach a successful end.
It’s not just you and your lender. There could easily be 15 or 20 companies, or more, that interact with your application.
This includes everyone who’s involved before you apply, like your mortgage broker and the aggregator (which is basically the middle man between the lender and your mortgage broker). Once the bank receives your file, it’s already seen by a credit reporting company, the valuation management company, and a mortgage insurer if you’re borrowing more than 80% of the property value. Even after approval, there are legal entities and the settlement agent who will need to look at the agreement.
That’s one of the big advantages of working with a mortgage broker. It’s our job to understand what goes on at each stage and to equip you with the knowledge and insight that can help to make sure your application goes through to the settlement stage. We’re also here to liaise with all of these different parties to keep everything flowing as it should.
The loan approval process isn’t as simple as most borrowers assume but that doesn’t have to stop you from getting the home of your dreams or growing your wealth with a smart property investment. Setting our clients up for success is what we do. Get in touch with us today to learn more – call us on (07) 3146 5732 to talk directly with one of our mortgage experts, or fill out our free online enquiry form right now.
How to Deal with Rigid Lending Criteria
One of the most frustrating parts of the home loan process is that you can easily run into a bank that won’t lend to you for one reason or another – even though you know you can afford the loan and are responsible with your finances. Some factors – like recently switching to a higher paying job or attempting to qualify for a really competitive loan and getting denied – have nothing to do with your ability to repay a mortgage from your perspective. From the bank’s perspective, however, this can throw a wrench in the entire process.
There is a way to get a lender to be more understanding of your situation. The key to getting approved is to apply with a lender that will look positively on your unique circ*mstances.
Because our mortgage brokers know exactly what each lender on our panel looks for, what they tend to hold against borrowers, and where they are more lenient, we can help you to take a strategic approach to the home loan application process, ensuring you apply with the right bank and then presenting your application in the right way.
Don’t feel like your options are limited because you’ve been denied for a mortgage in the past or if there is some reason your application may be less than perfect. Call (07) 3146 5732 today and chat with one of our experts.
Can I Apply with a Lender Myself?
Of course you can! Just know, help is there if you need it and you don’t have to pay a fee to use the services of a licensed broker.
If you do want to apply yourself, take the time to research different loan products and learn as much as you can about a lender before applying. You’ll also want to find out the value of the property in case the seller’s price is too high – you could run the risk of having to apply for a higher LVR than you anticipated, which could lower your chances of getting the loan at all.
Also, don’t jump into the application process because of the bank’s marketing or because they’re offering a rebate. This type of messaging is used to draw people in so they’ll apply. For example, a marketing email claiming you’re credit approved or you can save $500 if you apply with them doesn't guarantee they'll approve your application.
You do have something to lose if you apply and don’t qualify – this could damage your credit. And, you have even more to lose if you don’t research your options and apply for a loan with a great rate, low fees, and the right features. A loan with a high interest rate or expensive fees can add thousands to the overall cost of your mortgage.
As long as you have done your home loan homework, you’re confident you’ve found the top loan product you could be eligible for, and you’re sure your application is strong enough, there’s nothing wrong with applying yourself.
What an Experienced Mortgage Broker Can Do to Help
On the other hand, if you’re not sure which loan you could qualify for or want to make sure you’re getting the best deal possible, a good mortgage broker can potentially help you save a lot of money on a loan. Even better, they can take the hassle and questions out of the home loan process altogether.
Your mortgage broker will:
- Ensure your financials are in line with the lender’s criteria
- Check that you have the right financial documents ready
- Know which lenders will be willing to listen and can argue your case and explain any problem areas that may exist to your lender
- Negotiate a lower rate for you
- Give you plenty of insights to help you make decisions that work for you and answer any questions you may have about loan features, what steps are involved, or anything else
- Save you time because they’ll let you know which lenders you’re likely to qualify with
Ready to get a competitive loan and buy your dream home? Fill out our free online enquiry form or call (07) 3146 5732 and talk with one of our mortgage specialists today.
