4 Top Reasons Why Your Home Loan May Be Declined

What Can Cause My Home Loan To Get Declined – 4 Most Common Reasons

The process of buying a home is very tedious and lengthy, especially if you need a loan as the solution to financing.

You first have to see how much you can borrow and then find a home that would fit the criteria – after all, we can’t quite borrow as much as we’d want to. On top of that, there’s also the chance for your loan to get declined.

Because of this, you should submit your loan application as early as possible so that you don’t miss the purchase of your dream house. Still, why could your home loan be declined?

Credit File Defaults

During the home loan application process, your lender will take a look at your credit report. The latter records the current loans that are in your name, any previous loan applications, as well as whether you have defaulted on a loan or failed to pay a bill on time.

Defaults and bankruptcy are considered as black marks and may count against you when applying for a home loan! We do however have alternative second tier lenders who can consider approval if you have bad credit or listed defaults.

Deposit Issues

Every home loan comes with a maximum loan-to-value ratio – LVR. The LVR is the maximum amount you can borrow and is expressed as a percentage of the property’s value.

As you may know, a deposit is also required for a home loan. For example, if you apply for a home loan which has a maximum LVR of 80%, then you will need to put down a deposit of at least 20%. Naturally, if you can’t do so and this is the requirement, your home loan will be declined.

It is also imperative you consider holding genuine savings if you are applying for a home loan with a deposit less than 20%. Not holding genuine savings may see your home loan get declined.

Serviceability

Under Australian law, each lender has the duty to responsibly lend money to their customers. This means that, if you are a low-income earner and want to buy an expensive property via a loan, the chances for your application to get declined are quite big.

Basically, if the lender determines that you will not be able to make regular loan repayments – now and in the future – they will decline your home loan application. The lender will need information regarding your income, as well as your debts. They will use this information to see how much of your monthly income you use to pay off your debts.

If too much of your income is used for previous debt, then they will deem you as unable to afford mortgage repayments.

The Valuation

Home loans will not be approved until and unless the property that one wishes to purchase is professionally valued.

The lender wants to make sure that they will be able to recoup their losses in case you default, and the property has to be sold. You may be willing to pay more for your dream house, but a lender will definitely not take any risks.

The valuation will need to be within the LVR guidelines and if it is a purchase, the valuation will need to match the Contract of Sale. Unless you have the funds to cover the shortfall, the lender may decline your application should the valuation not match the LVR or contract of sale.

Here at Highline Lending, we have access to ordering complimentary upfront valuations prior to starting a loan application and prior to clients committing to a property purchase, this ensures the valuation doesn’t have the loan declined and also helps us structure your finances.

The Bottom Line

As you can see, there are a lot of reasons why your home loan may be declined. In fact, you can be faced with such a decision even if you fail to provide your lender with enough documentation.

Therefore, applying for a home loan and ultimately buying a house is not as easy as it may seem. To overcome or prevent any issues that may get your home loan declined, you can always contact us and have one of our experienced mortgage brokers help you.

We will guide you through the entire process of finding a loan and help you find the one that fits your needs! Just reach out and contact us today for questions or more information! Contact us on on 02 9121 6247 or submit your scenario online.

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With our many years experience in the industry, we’ve been exposed to both easy and complex loan scenarios. Each loan we process gets presented to over sixty financial institutions, ensuring we have explored all options possible and are able to provide a solution

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Jye Smith

6. May, 2022.

An exceptionally personal service with care and attention taken for a complete novice like myself. I felt well supported and communicated with at each step.

Charul Lalchandani

21. April, 2022.

Thank you for being so wonderful and gracious to me during the entire process, Trae! We’re delighted to find you after sone bitter experiences with mortgage brokers. Thanking you from the bottom of our hearts for all of your help to get the loan and for assisting us with all of the papers. It has been a pleasure to work with you. You will always be my go-to! Cheers~

Sean O'Connor

14. April, 2022.

We were originally referred to Trae and Highline Lending by another trusted advisor. Trae cut through a lot of the issues in getting our finance sorted that we would just not have had time to do which probably would have stopped our purchase. Even if we had the time we would not have been able to work through them as effectively and efficiently as Trae did. Trae always came to us with solutions not problems - which was great. When one lender put up a roadblock at the last minute (sigh), Trae was already sourcing an alternate. I don’t remember lending ever being as hard as what our refinance and purchase was this time round because of all the barriers that are now in place with lending - but I know we would not have got it done if we did not have Trae and the team on our side. I cannot recommend Trae and Highline Lending enough. Sean

jacob Hill

13. April, 2022.

Trae was very knowledgeable and knew answers to all the questions we had. Each step was explained in depth as he guided us to a home loan that suited our needs. Trae took the time to find out what our future plans work to make sure we were able to pursue them once we had settled.

Paul Condran

If you want to quickly get a home loan without wasting time with financial institutions, the professional and enthusiastic services from Trae at Highline Lending is what you need! He knows the lenders that will work for your situation. If issues arise with the process, they’ll help you through and provide alternative solutions. He also explains everything very well and patiently answered all our questions, so we wouldn’t hesitate to refer anyone to Highline Lending!

Katherine Uhila

12. April, 2022.

Thank you Trae and team This refinance was a certainty a challenge when all other lenders rejected me Trae took the challenge and made it happen. Trae is professional, patient and empathetic. Great outcome much appreciated. Recommend this service to all.

Richard Planca

6. March, 2022.

Very professional and provides a high level service. Is always available and committed in delivering the best results for his clients.

LX LXX

13. January, 2022.

Trae was referred to me by a good friend of ours even though we are based in Melbourne and Trae is in Sydney. We did everything online and it was super easy. Trae managed to get us a great new rate, allowing us to save some extra money - makes me a little frustrated that I didn't know about him years ago! Couldn't rate him higher and looking forward to continue working with him in the years to come. Allie & Michael

Ahmad Beydoun

11. January, 2022.

I've worked alongside Trae on many transactions with a number my clients over the last few years and I am glad to have had the opportunity to get a feel for how he works having just had my personal mortgage across the line. Trae's knowledge, enthusiasm and willingness to get things done is impeccable and the overall experience dealing with him has been second to none. We've dealt with many brokers previously and can say that his understanding of the industry is amongst the best. I cannot recommend him and his team more and I look forward to continuing working with him.

Adam Cole

6. December, 2021.

Trea from highland leading is great. Everything from simple information , product selection and advice right thru to Application process and Communication is above all of our expectations

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4 Top Reasons Why Your Home Loan May Be Declined

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