Securing a mortgage is a significant step toward the dream of owning your own home. However, if your bank has turned down your mortgage application, it might feel like a major setback. The good news is that being declined by one lender doesn't mean this is the end of it. There are things you can explore to increase your chances of getting approved the next time.
1. Understand the Rejection:
First and foremost, understand why your bank rejected your application. Lenders typically decline applications due to reasons such as low credit score, insufficient income, high debt-to-income ratio, or a lack of deposit. Understanding the specific reason can guide your next steps.
2. Work on Your Credit Score:
Your credit score is a crucial factor in mortgage approval. If your credit score is low, take proactive steps to improve it. Obtain a copy of your credit report, identify areas of improvement, and work on paying off outstanding debts. Making timely payments and reducing credit card balances can significantly boost your credit score over time. Check that the entries are accurate and remove any that are incorrect.
3. Explore Alternative Lenders:
Banks are not the only companies that offer mortgages. Look for lenders that offer more flexible lending criteria, making it easier for individuals with less-than-perfect credit histories to secure a mortgage. Research different lenders and compare their criteria and products to find an alternative.
4. Save for a Larger Deposit
A larger deposit can increase your chances of a mortgage approval. Lenders may be more willing to approve your application if you can provide a bigger down payment as it demonstrates your commitment and reduces the lender's risk. Consider delaying your home purchase until you can afford to put more down.
5. Plan to apply
Some people don’t put the time in before they apply. Taking some time to understand what the lender is going to ask for, can help in speaking to the right lenders from the start. Do you know what their criteria is, and do you know what supporting documentation they are going to ask you to provide?
6. Seek Professional Advice:
Consulting a mortgage broker can be invaluable if you've been rejected by a bank. Mortgage brokers have access to a network of lenders, some of which you cannot approach directly. They can help match you with a lender that suits your financial situation, especially if the reason you are being declined is your credit file. They can help you plan for your next mortgage application and guide you should the solution be to wait and apply later.
If you are unsure if your next application is going to suffer the same fate as your first, then speak with someone to plan for it. Speaking with a Mortgage Broker will offer some options if you are looking now or considering a future mortgage application.
The information contained within was correct at the time of publication but is subject to change
Your home may be repossessed if you do not keep up repayments on your mortgage