What Happens If Your Mortgage Application Gets Rejected?

It can be frustrating and disheartening to have your mortgage application rejected, especially if you’ve been hoping to purchase a home. 

If your mortgage application gets rejected, the lender has decided not to give you a loan. This can be for various reasons, including poor credit history or not having enough income. If you’re rejected, it’s essential to find out why to improve your chances of being approved next time. 

Why Did Your Home Loan Application Denied

There are several reasons why your mortgage application may have been denied. Some of the reasons include:

• You have a bad credit history. The most common reason is poor credit history. If you have a low credit score, lenders may view you as a high-risk borrower and be reluctant to give you a loan. 
• You don’t have proof that you can pay it off. Lenders will also look at your employment history, bank statements, and tax returns to get a comprehensive picture of your financial situation. If any of these factors are not up to par, it could lead to a denial of your loan application.
• Your employment history is unstable. Lenders want to see that you have a steady source of income and can make your loan payments on time each month. If you have unstable employment or a source of income, enough income to cover the loan payments, then the lender will be reluctant to give you a loan. 
• You don’t have enough savings. Lenders typically require borrowers to put down at least 20% of the home’s purchase price as a down payment, so if you don’t have enough saved up, they may deny your loan application. 

What If You Already Bought a Home

If you’ve already bought a home, you may wonder what to do if your mortgage application is denied. There are a few options available to you:

1. You can try to appeal the decision with the lender. This may involve providing additional documentation or information about your financial situation.
2. You can try to reapply for the loan with another lender. This may be difficult if your credit score has not improved since you first applied for the loan.
3. You can try to negotiate with the home seller to see if they are willing to work with you on financing options. This option may not be available if you are already in escrow or have closed on the property.

What Are the Steps to Improve Your Next Loan Application

There are a few steps that you can take to improve your chances of getting approved for a home loan:

1. Improve your credit score. Lenders look at this most important factor when considering a loan application. If you have a low credit score, try to improve it by paying off debts and making all of your payments on time.
2. Save up for a larger down payment. Lenders typically require borrowers to put down at least 20% of the home’s purchase price as a down payment, so if you can increase your savings, it will improve your chances of getting approved for a loan.
3. Stabilise your employment history. Lenders want to see that you have a steady source of income and can make your loan payments on time each month. If you have unstable employment or an income that fluctuates, try to get a new job or find another source of income that is more stable before applying for a loan again.
4. Make sure you have all the necessary documentation. When you apply for a loan, the lender will ask for various documents, including proof of income, tax returns, bank statements, and more. Make sure you have all these documents ready before applying to increase your chances of being approved.

Conclusion

It is important to remember that a mortgage application rejection is not the end of the world. There are plenty of other options available to those willing to explore them. Following these tips and with a little perseverance will eventually find a mortgage that meets your needs.

If you are looking for a mortgage broker in Australia, look no further than Shore Financial. We have a team of experienced and qualified mortgage brokers who are experts in finding the right home loan for you. We work with various lenders to find you the best deal possible. Let us help you find the right home loan for your needs. Book a consultation with one of our expert mortgage brokers today!