So you’ve found your dream home. Everything seems perfect, until you apply for a mortgage. If the bank says “no,” most of us want the earth to open up and swallow us whole. It’s a sinking feeling but it’s not the end of the world. If you have applied for a home loan and have been rejected, this guide to getting things back on track will help. So – what should you do when your bank says no?
- Don’t Panic
The first rule of rejection is don’t panic. Yes, it doesn’t feel pleasant but a “no” here doesn’t mean a “no” forever. Keep calm in the knowledge there are many more options out there for you. Take a deep breath and start again.
- Look for the reason why
If a bank or lender rejects your application, ask them for a detailed reason why. This gives you a chance to fix the situation, so you can match the lending criteria set by your lender. You may be surprised to learn the rejection may not have anything to do with you personally.
- Find and fix your credit history
Whenever we apply for credit, the application ends up on our credit history. When we’re approved and pay things off, it’s a good sign for lenders. When we’re denied or default, it’s a bad sign. The fact is, our credit histories aren’t as easy to look at as our bank balances. We can apply to see them (for free!), and once we have them, it’s up to us to fix any errors. For example, if you forgot to pay an electricity bill, this can come up as a default in some cases.
- Establish a pattern of good financial standing
Before you try applying again, remember your lender is part bank teller and part detective. They want to make sure they’re not approving finance to someone who might not pay them back. You could be an upstanding citizen, much in contrast to the person who was in financial trouble in the past. However, you have to provide evidence to make your case. This means providing pay slips, paid bills, bank statements and residential histories to any lender. Yes, your credit history is a large part of the lender’s decision to approve or deny credit. But supporting evidence goes a long way, and could even grant you access to better terms and rates.
- Look for more options
There’s no excuse for not doing research on home loan lenders or brokers. There are so many to choose from, all offering different rates, terms and packages. Use a broker with a team of financial professionals to help scour the market for you. Home loan lending is a business, and lenders want to lend to you. So make the most of your options – just don’t apply until you’re completely sure. As we mentioned before, rejections do raise eyebrows in the long-term.
About the Author:
Bill Tsouvalas is CEO and managing director at Savvy, an automotive and mortgage brokerage institution and BRW’s fastest growing financial company in 2015.