We are living in changed times, people. Back in the day – that’s pre GFC – lenders handed out home loans a lot more freely. That’s to say it was a whole lot easier to rely on credit to find your dream home.
But today, mortgage lenders are a bit more prudential. That’s because the Australian Prudential Regulatory Authority (you see what I did there?) has cracked down on handing out loans all willy-nilly. And it’s for a good reason too – we need to make sure that homebuyers can actually afford to meet these mortgage repayments.
This means that inevitably mortgage applications can be declined.
But first thing’s first – if your mortgage application has been declined, it’s not a dead end for your first home buying journey. So relax.
What to do if your mortgage application has been declined
Find out why your mortgage application has been declined
Think of your mortgage application like a test that assesses your home loan affordability. If your application has been declined, the only way you’ll be able to be successful next time is to get feedback. You need to understand what’s preventing you from getting your mortgage, so try to find out what the issue was with your application. You should get this in writing from the lender. Common hurdles can include your existing debts, not having enough of a home loan deposit, not having sufficient income to prove you can afford to pay off your mortgage, or not providing enough information to prove you can pay it back. Make sure you have all of these details – that’s pay slips and bank statements, etc – easily accessible and ready for your next mortgage application.
“If your mortgage application has been declined, it’s not a dead end for your first home buying journey.”
Don’t apply for others…yet
This isn’t Tinder, so don’t start looking for backup. If you start sending out multiple mortgage applications, you could risk damaging your credit history. And when you further damage your credit history, you’re just digging yourself an even larger hole to climb up out of. Which brings me to…
Check your credit history
I always recommend my clients get a good handle on improving their credit score before they apply for a home loan application. But if you’ve missed this step, it’s not too late for you to turn things around. If your mortgage application has been declined because of your credit score, you’ll need to know how you can solve this so that you’ll be more successful next time.
It’s not impossible. Find out how to improve your credit score over here.
Use a broker
Here’s the thing about mortgages – unless you have the time and energy to invest in understanding the complex world of mortgages, trying to get a firm grasp on the ins and outs of home ownership can be mighty confusing. But it doesn’t have to be, and this is where a mortgage broker comes in. No two lenders are the same, and an experienced mortgage broker will know which mortgage and which lender is right for you. Consider them your wise guide on your journey to home ownership. Kind of like Gandalf the Great, but most likely in a suit.
Your mum was right when she said there’s no use crying over spilt milk. And there’s no use throwing your hands up in the air and cursing the Sydney property market if your mortgage application is declined once. You have my permission to feel disheartened for a whole of one second – and then get back out there and see how you can improve your situation.
Best of luck! Now, onward march.