Picture this, you’ve found your dream home – the one that you’ve spent months and months looking for – you’ve told your friends and family about it and after all that at the 11th hour the bank turns around and says “we can’t give you the loan you are after”. Nooooo!
What could stop you from getting a home loan?
There’s really three things we see fairly regularly that could stop you from getting your loan approved!
In a perfect world the bank wants the lowest risk borrower possible, someone that is going to pay back their loan on time and in full so the purpose of the loan and having a good (or bad) credit history can make a big difference with the lenders you might qualify for.
To work out if you qualify most banks have developed their own credit scoring systems that take into account all of the following areas including your credit history, your financial stability and the type of property you are wanting to buy.
Your credit history
Your credit history means things like small defaults, bankruptcies or judgements on your credit file. You can either get in touch with us to get a copy of your personal credit file, or check out Equifax’s website and request a copy of your credit file.
Defaults as small as $100 can cause a bank to stop you from getting a home loan.
As an example we’ve recently had a first home buyer who had a small phone bill that was sent to their old address, they moved and it was never paid. This first home owner never received the bill, and wasn’t notified of it being overdue because all the mail was going to the wrong address.
As a result the phone company put a default on their credit file for the amount owing and the first home owner didn’t become aware of this until they tried to apply for finance through their bank and got knocked back! Fortunately they came to us, and we were able to help navigate around it and find a lender that would let them buy their dream home.
Having a black mark on your credit file doesn’t necessarily mean it’s the end of the world and your loan may not get declined, but we can help you apply with the right lender for your situation to make sure you get your loan approved.
Your financial stability
Your financial stability looks at things like how long you’ve been in your job, if you’ve moved around a lot and your financial capacity to pay back the loan.
The amount of money you are paid doesn’t just make a different in how much the bank will lend you, but each bank has their own policy on how much they can lend you – so just because your bank said they wont lend you as much as you need to buy your dream home doesn’t mean another lender might not be able to get there.
As an example with the below scenario, based on 2 adults with a combined income of $85,000 from Lender A who will lend the couple $465,900 to Lender G who will lend the couple $326,516 there is a $139,000 difference based on the same income and same situation.
So just remember it pays to work with an experienced mortgage broker to make sure your lender fits with all of your needs.
The type of property you want to buy
The type of property you want to buy makes a big difference, and ultimately how easy it would be to sell based on the banks valuation.
Each bank has different policies and requirements on the types of properties they will lend money to – some banks love lending on apartments in the middle of the city, others simply won’t lend on units and will knock back your loan.
As an example, we’ve recently had some clients wanting to purchase units off the plan, and some banks simply won’t lend against this type of property – regardless of how good your credit file is, how strong your income or how much deposit you have.
Further to this some banks will be ok with lending to units off the plan, but have restrictions based on:
- The suburb or postcode where the unit is located, sometimes with restrictions based on high density or inner-city locations.
- How many floors the block of apartments has, sometimes with restrictions when it is higher than 4 stories.
- The total floor area inside the apartment, with restrictions if it is less than 40 square metres.
- If the bank already has too much lending in the building you are wanting to buy in.
It is important to work with an experienced mortgage broker to help find the right lender for you.
Is that all that can stop me from getting a loan?
Having an issue with one of these items is usually solvable, but not many lenders will approve home loans when you have lots of credit issues regardless of dealing with a bank or specialists lender.
For example if you’ve just started a new job and are on a probation period, making part of your salary as bonuses and applying for a guarantor loan – a lender might be ok with one of these things but unfortunately won’t be ok with all three!
And even if you have a perfect credit file the amount you make and your financial situation are only just some of the factors to work out if you are able to borrow.
Help this is all confusing
If you are looking to buy speak with one of our experienced mortgage brokers to walk through the next steps with you.
At Hunter Galloway we help property buyers get ahead in this competitive market, we give you the actual strategies that have helped other property buyers like you secure a property when there have been 5 other offers on the table! Enquire online or give us a call on 1300 088 065.