It is not uncommon to have a mortgage application rejected by your Bank. While this can be disheartening, it may not necessarily mean that you will not be able to get a mortgage. It is important to understand exactly why your application was rejected so you have the opportunity of rectify the issue. We are here to discuss some reasons as to why your mortgage application was declined and where to go from here.
Poor Credit History
The first thing most Banks look at when assessing a loan application is your credit history. Credit history is basically a track record of how you have conducted yourself financially over the years. This might include credit cards and previous loans taken out. When there has been a history of missed payments on somebody’s credit history there is little chance that a Bank will approve a new loan. However, there are always alternatives and this is where an experienced Mortgage Broker really comes into their own. There are lots of options in New Zealand, many only available via professional Mortgage Brokers such as iLender.
Debt to Income Ratio
A mortgage application may be declined due to a debt to income ratio which is above a certain threshold. Debt to income ratio is a measure of income against outgoings. For instance, if you make $100 000 a year and your mortgage repayments total $30 000, then your debt to income ratio will be 30%. As a rule of thumb, lenders typically say that debt to income ratio for housing should not exceed 40%. If you’re application has been declined by the Bank for having a ratio that is too high, then you have choices. Can you get cheaper money? Can you find a property that is more affordable and definitely contact a Mortgage Broker as Banks have different levels of income ratios.
Work History
If your work history has been somewhat erratic there is a chance that your application will not be approved by the Bank. Banks do not like short term working arrangements, probation periods or short term Self Employed applications. These are things which can be tricky to deal with and it is best to consult a Mortgage Broker to help you assess what can be done get your application approved.
Other Options
Banks have strict lending policies as they are typically large institutions that are bound by certain rules and driven towards a specific client profile. In New Zealand there are many non-Bank alternatives, often at Bank rates as well as Finance Companies and Private lenders for the more challenging situations. As well as working to remedy the common factors that lead to mortgage rejection, Mortgage Brokers provide solution based advice and if not a Bank from day one, the aim is always to get you to a Bank as quickly as possible.
Recently been denied approval for a mortgage loan? Contact our team today for mortgage solutions that your bank can’t offer you
