Mortgage Application Declined? Try This

You've talked to a bank about getting pre-approved for a mortgage, but your application was declined. Now what?
It’s easy to get discouraged when the bank rejects your mortgage application. But - if at first you don’t succeed, try again. It’s good to know that you have other options available. There's lots of ways to make yourself as attractive as possible to lenders.
We’re going to break down some reasons the bank may have rejected your application. And, what you can do to make sure you get accepted the next time around.

Why Was My Home Loan Application Rejected?

Banks take a lot of different factors into consideration when assessing mortgage applications. Here's three of the most common reasons:

• High debt. Even car loans, personal loans or unpaid credit balances can affect a bank's decision to lend. To them, debts could mean you can’t afford your mortgage.
• Poor credit history. Falling behind on credit card payments, or missing repayments of monthly bills can all affect your credit score.
• Unsteady income. Changed jobs a lot? Maybe you’re self-employed. Banks are reluctant to lend if you have an inconsistent income.
• Different rules. Each bank has different rules for lending. Some have higher test rates and are less likely to lend at different times in the market cycle.

  Review Your Experience With Your Bank or Broker

  Ask yourself what your experience with your bank/broker was like. Did you get a good feeling from them? How did they make you feel? Did they guide you through what you can do to improve your situation?
  Don’t be afraid to ask about all the options available to you. If you didn’t get a good result the first time around, ask what you can do to improve your chances.

  Get Another Recommendation

  If at first you don’t succeed, get a second opinion. If you went directly to your bank, try talking to a broker. Brokers offer financial advice to people wanting to buy a property and help them apply for a mortgage. Unlike a bank, it’s their job to make sure you succeed.
  Brokers have wider access to more lenders and different financial institutions. Don’t just talk to one; talk to a few if you need to. Having a range of options means giving yourself the best chance of success.

  Kāinga Ora’s First Home Partner Scheme

  First Home Partner is a shared ownership scheme provided by the government through Kāinga Ora. It helps first home buyers whose deposit isn’t quite enough, to bridge the gap and purchase a home that meets their needs. We've put together a free guide to help you understand how it could help you. Download it here.

  Buying with Friends and Family

  Friends or family combining funds can be a great way to get on the property ladder at the same time. More Kiwis are solving that problem by buying together with friends/family and splitting the costs.

  Government Help

  There's government grants available for first home buyers. If you're a first home buyer, you may be eligible for a Grant of up to $10,000. You apply through Kāinga Ora - Homes and Communities.

  Review Your Wants and Needs

  More often than not, your first home isn’t your dream home. You might have to reconsider what you want and what you really need.
  For example, do you really need three bedrooms or could you do with just two? Do you need a standalone house or could townhouse living do the trick? Is a garage essential, or can you settle for a carpark?
  It’s important to be open-minded and explore all the options available to you.

  Pay off your debts

  Paying off a car? Credit card? Maybe you bought your new laptop on finance? It’s best to work towards clearing these off as soon as possible. If that’s not possible, take a look at how much you owe and what interest you’re paying.

  Set yourself a budget and stick to it

  Banks generally review 3 months of spending on your statements. It’s a good idea to reduce any extra spending 3 months before applying for a loan. Uber Eats, expensive nights out, unnecessary clothes shopping. Another one people overlook is monthly subscriptions. Do you really need Netflix, Amazon Prime, and Disney+?

  Make Sure You Have Someone Guiding You

  Getting a home loan is a pretty daunting experience, and when you’re first starting out there’s a lot you don’t know. Consider getting an agent to help guide you through the process. A good real estate agent can help you maximise your chances of success.
  When looking for the right person to help, ask yourself a few questions to separate the good from the great. Do they have the tenacity to help you through the process? How much experience do they have? What are their testimonials like? All this legwork is important to make sure you’re bringing someone on board who can really do the best they can for you.
  So there you have it. There’s a lot you can do to turn that no into a yes - the second time around. Have you been declined by your bank? Talk to SM Property and we’d be happy to help you explore your options.