Reasons why my loan can get declined

Any general questions you might have in regards to loans and finance.
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Bruce
Posts: 34
Joined: Thu Jun 20, 2013 6:21 pm

Reasons why my loan can get declined

Post by Bruce »

Hey there,

I work as a firefighter in Salem and earn $53,000 annually. I have saved up quite a bit for the past two years. I believe that I will be ready to buy a home within a month or two but I am worried that my loan will be rejected by the banks. I am worried because I have some friends who have had their loan applications rejected.

I want to get a professional opinion on the actual reasons why a lender may reject a loan. Can anyone in this forum help me out with this?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Reasons why my loan can get declined

Post by Otto Dargan »

Hi and welcome to the forums Bruce.

Lending policies may differ from lender to lender. Each lender may have their own reasons to reject your loan. However, there are some common factors that each lender may look at when assessing your loan application, such as:
  • Deposit:
    Your loan may be declined if you do not have at least 5% to 10% of the property value as a deposit. However, if you are applying for a guarantor loan then you may not need a deposit.
  • Credit history:
    If you have adverse listings in your credit file such as bankruptcy, defaults, judgment, or a court writ, then the lenders may consider you a risky borrower. Your loan application may be declined even if you have paid off all the debts. This is because any adverse listings may remain in a credit file for as long as seven years.
  • Employment:
    Your loan application may be rejected if you are temporarily employed, you have been in your job for less than 12 months, or you have been self-employed for less than two years. On the other hand, if you are currently not employed anywhere, you may not even be eligible for applying for a home loan.
  • Age:
    You must be over 18 to qualify for a mortgage. However, even if you are 19 or 20, you may have very little or no credit history to prove that you are a good borrower. For that reason, lenders may decline your loan. Your loan may also be declined if you are above the age of 45, unless you can prove to the lender that you have a proper exit strategy to pay off the mortgage.
  • Property type:
    Lenders need to be sure that the property you want to purchase can be sold easily, in case you default on your mortgage. Therefore, if you want to purchase a unique property or a property with location restrictions, then the lenders may not be willing to help you.
  • Spending habits:
    Lenders may look at your transaction history and evaluate your spending habits to decide whether or not you can afford to make the repayments. If you have a habit of shopping too much, partying too hard, or gambling, and it shows up on your statements, then your loan may not be approved.
  • Enquiries on your credit file:
    If you apply for a loan and a credit provider accesses your credit file, then it is registered as an enquiry in your file. If you have more than two enquiries within the last year, then it may cause you difficulty getting a home loan.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bruce
Posts: 34
Joined: Thu Jun 20, 2013 6:21 pm

Re: Reasons why my loan can get declined

Post by Bruce »

Thank you for such a detailed explanation. I am just 20 and earning well. I have also been making my personal loan repayments on time. I am starting to feel confident that my home loan application will be approved. Is there any way that I can make sure that a lender does not reject my loan?

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Reasons why my loan can get declined

Post by Otto Dargan »

Hi Bruce,

The key is finding the most suitable lender. It is recommended that you find a specialist mortgage broker who can quickly identify the obstacles in your loan application. An expert broker can find a way around such obstacles to present a strong case to the most suitable lender for your situation.

If you want to learn more about home loans then you can visit our website. If you want to talk to one of our experts about finding the most suitable lender for you then you can call us directly on 1300 889 743. You can also enquire online and one of us will contact you soon.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Bruce
Posts: 34
Joined: Thu Jun 20, 2013 6:21 pm

Re: Reasons why my loan can get declined

Post by Bruce »

I am glad that my friend recommended this forum to me. I am positive that if you will help me find a suitable lender, then I will be living in my own house in a few months. I will give you a call within a few days to get started on the application process.

ninjazombie
Posts: 43
Joined: Fri Jan 11, 2013 9:44 am

Re: Reasons why my loan can get declined

Post by ninjazombie »

Hello there,

My father told me that he had borrowed 120% of the property value when he bought his first home with a guarantor loan. This got me excited so I applied for a mortgage with St George Bank after my parents agreed to be my guarantors. However, the folks at the bank said that they don’t provide the 120% loan services anymore. I’m not sure if the bank is being truthful about the rejection. Can anyone here help me out?

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Otto Dargan
Mortgage Specialist
Posts: 7729
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Reasons why my loan can get declined

Post by Otto Dargan »

Hi ninjazombie,

In the past, lenders used to allow people to borrow up to 120% of the property value with a guarantor loan. Unfortunately, this is no longer the case in the current day and age.

However, it should be noted that it may be possible for you to borrow up to 105% of the purchase price. It may even be possible for you to borrow up to 110% of the purchase price if you are also consolidating minor debts.

If you want help getting approval for a guarantor loan then you can give us a call.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

ninjazombie
Posts: 43
Joined: Fri Jan 11, 2013 9:44 am

Re: Reasons why my loan can get declined

Post by ninjazombie »

I get it now. Thank you for replying so soon! I I guess I’ll have to go for a 105% loan since it seems like that’s all I can get right now. I’ll need help with the application process so I’ll give you a call once I talk to my parents about this.

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