If you’ve ever been on the receiving end of a loan application being rejected, you might think your home ownership dreams will never, ever come true.
Banks and lending institutions are tightening their policies and digging deeper into the financial situations of applicants, in order to minimise risk. That don’t mean it’s a time to panic or worry but it is the perfect time to make a connection with an experienced loan broker or mortgage broker to help guide you through the application process and show you the diverse range of lenders who may be happy to take on your loan.
Professional mortgage brokers understand that everyone’s personal situation is different – and it’s their passion to find a lender to suit your circumstances, whether you’re self-employed, nearing retirement, or looking into innovative ways to take on debt, such as dual occupancy developments or with guarantors for your loan to help get your mortgage application across the line in the most streamlined way possible.
But, even with a mortgage broker working with you, here are 7 things that might make your loan application a bit more challenging. They are not insurmountable but do take some careful consideration to help give you the best possible chance of loan application success.
1. BORROWING 95%
Any loan application that is 95% of the value of the property is seen as a bigger risk from the banks and lending institutions. If you are applying for maximum finance, it’s important that your application is a strong one – with no red flags. Have all your financials in great order by preparing with your accountant first. Having a guarantor to support you can help but it’s important both parties enter the arrangement with their eyes wide open – and backed up by professional legal advice for peace of mind on both sides.
2. YOUR CREDIT RATING IS BAD
Bad credit history is an instant decline for the majority of lenders but there are some who will take on applicants with a chequered credit history – although it’s important to realise this comes at a higher cost. Make sure you look at all your options before singing on the dotted line.
3. YOU’VE MADE MULTIPLE CREDIT APPLICATIONS BEFORE
If you have a lot of previous loan applications on your credit file, lenders see you as a bigger risk. There are some lenders, though, who see the bigger picture and understand that circumstances can change. Shop around to find one that suits your individual needs but be aware that it might mean you have less access to the most competitive interest rates and may have to jump through a few extra hoops in order to achieve your lending goals.
4. YOU’RE NEW TO YOUR JOB
Banks and lenders love seeing a steady employment history but in today’s changing world, with employment opportunities evolving away from the traditional landscape of long-term, stable employment patterns, forward-thinking lenders understand that everyone’s situation can be very different for a variety of reasons.
5. YOU NEED TO DEVELOP BETTER SPENDING HABITS
Banks and lenders are taking a closer look than ever before at frivolous spending, such as subscriptions to online entertainment packages, excessive restaurant deliveries and splurges on expensive luxury items. If you want to create a long-term budget that is sustainable and sensible, it’s time to get your spending habits in order and say goodbye to all those treats you really might not be able to afford. Making a decision to invest in property and take on a mortgage is a serious one and to help ensure you can meet the repayments on time, it’s smart to be realistic about what you need to spend your money on, as opposed to what you want to spend.
6. YOU’RE SELF-EMPLOYED FOR LESS THAN TWO YEARS
It’s a hard policy to overcome but there are lenders who will look at you. Weigh up the genuine urgency of your loan application, though, as restricting yourself to lenders with less competitive interest rates may not be the best decision for your long-term budget. Patience and the commitment to building up a record of good earnings and savings habits may help you win a better mortgage deal in the end.
7. RETIREMENT AGE IS NEAR
Banks aren’t allowed to discriminate based on your age but they can demand a realistic exit strategy to give them the confidence you can meet the demands of the loan, for the life of the loan.
Alternatively, if you want to retain your loan then the lender needs to be satisfied you will have sufficient ongoing income to meet these repayments after retirement.
If you believe you have some loan application challenges to overcome, talking to our experienced team of mortgage broking experts at Lending Specialists can give you the advice and support you need.