What To Do When a Bank Says No To Your Mortgage Application?

denied mortgage application

You may be a point in your life when you are dreaming of getting your own home or maybe moving into a newer, better one. Then it happens: you learn that your bank denied your mortgage application.

Getting your mortgage application denied can be disheartening and incredibly frustrating, especially since banks rarely tell you why.

Reasons your mortgage application was rejected

The truth is that even though you have been a loyal customer of the bank for years, that does not matter when you apply for a home loan. In fact, it is not at all uncommon for banks to approve a brand new customer and then decline a loyal one.

Banks are always cautious. Naturally, they will try to minimise risks as much as possible. Because of that, they can flat out decline your application.

That said, there are hundreds of reasons why a bank will decline your mortgage application. Here are some of the most common reasons:

List of pending debts

If you have taken out a car loan, have an ongoing personal loan or have unpaid credit card balances, these can affect the bank’s decision about your mortgage application. Banks do not want to risk you not being able to afford the mortgage because of all your other expenses.

Property location

Your mortgage application can also get declined if the bank does not find your property suitable or accessible. The same is true if you are planning to use the funds towards buying a home in a place that has a high crime rate.

Poor credit history

If you have bad credit history, this can be another mark against you. You do not even need to have a history of filling for bankruptcy or foreclosure to ruin your credit. Getting behind on your credit card payments or having insufficient funds in your checking account can be enough.

Banks run out of funding

Believe or not, banks do run out of money. In fact, they have a specific and limited amount of lending that banks are allowed on their books. Once they have reached the maximum number of mortgage applications they can approve, they will have to decline all following requests. So, if you have a stellar credit history, this can be the reason why your home loan application was rejected.

What are your options?

There are other options in getting a home loan application.

One of the best ways is to start with consulting with an expert financial adviser. Your financial expert can analyse the situation to help you craft a stellar application. Your mortgage broker can also set you up with a non-bank lender first just to get your mortgage application going so you can to buy that house. You can later switch the mortgage back to a significant name bank once they see stable payments have been made and your situation is deemed as less risky.

Are non-bank lenders better?

In terms of fees, non-bank lenders can even give you more competitive rates than banks. So while mortgage brokers and financial advisers may charge a small commission fee, they do not  cost any more to consult with them.

In the end, their expertise and advice will help you in securing that mortgage. And any customer would agree that finally securing your new home and having the means to pay for it is priceless.

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Just Mortgages

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