Getting a mortgage represents a significant financial commitment. For many home buyers, it’s a matter of doing plenty of research and looking at lots of different property and mortgage options before settling on one.
But what can you do if your mortgage application is declined by the bank? Can a mortgage broker turn things around for you?
The answer is yes. Experienced mortgage brokers understand the ins and outs of different home loan options and have the strong negotiation skills required to help the loan applicant get their mortgage. If you’re impatient, uncertain about your financial situation when it comes to loan approval or feel as though the banks are giving you the run-around, you should consider seeing your local mortgage broker.
Why Do Banks Turn Down Mortgage Applications?
Lenders can decline a home loan application for a variety of reasons based on their own criteria. Most of the time it can fall under one of the following reasons.
● Insufficient income to service the home loan - The bank will reject an applicant if their income is not sufficient to meet lifestyle costs and mortgage repayments should interest rate rises.
● Insufficient deposit - A minimum 10 per cent deposit is needed to make a purchase for first home buyers. Standard owner occupied require a 20 per cent deposit while investments require a 40 per cent deposit.
● Unacceptable property - Banks are cautious and minimise their risk wherever possible. As a result, they can reject a home loan application if they feel the property is too high risk; for example, if it’s in a bad area or if it has structural issues.
● Bad credit history - Banks can quickly find out if you have a history of not paying back debt. If they find out, there’s a good chance the application will be rejected.
● Any signs of instability - Any unsteady or irregular income, e.g. if you’re newly self-employed or recently left a job can result in rejection.
How Can a Mortgage Broker Help?
If your mortgage application gets rejected by a bank, a mortgage broker could help. They factor in any individual circumstances which may present a challenge in securing a loan and find a way of getting around it. For example, if you’re unable to meet minimum deposit requirements with your own savings, a broker can arrange to use existing equity in a parent’s home or other property to meet the amount.
If you were declared bankrupt or have been self-employed for less than 12 months, a broker could help you prepare additional documentation to secure a home loan. For example, self-employed home buyers can get a home loan approved if they provide additional information (e.g. cash flow projections) to illustrate that they are financially secure enough to service the loan.
Additional Benefits of Using a Broker
A mortgage broker acts independently of banks and other financial institutions. Their experience and understanding of mortgages, legislation and market forces gives them the knowledge to find a suitable home loan for varying individual circumstances.
They play an important role in the property market by liaising with lenders and mortgage applicants to ensure the process goes smoothly for everyone involved. A broker offers convenience and security to the lender by overseeing the process; this benefits the applicant by minimising stress, offering better response times and a better deal overall.
The team at Wealth Health can help you get the best mortgage deal available for your situation, whether you’re a property investor or a first home buyer. We’re based in Papamoa, Tauranga but we can come to you! Call Craig on 027 667 2537 or contact us online.