Why has My Home Loan been declined?

Navigating the path to home ownership can be as complex as it is exciting. While most prospective buyers are aware of the common reasons a mortgage application might be declined – such as a low credit score or insufficient income – there are lesser-known pitfalls that can also derail your home-buying journey. Understanding these can be the key to not only securing your mortgage but also ensuring you get the best possible terms.

  1. Inconsistent Income or Employment History

Lenders love stability. If you’re self-employed, work on a commission basis, or have an irregular income, lenders may view your financial situation as unstable. This is particularly pertinent for those nearing retirement who may have transitioned to part-time work or consultancy roles. It’s essential to demonstrate a consistent income stream, which sometimes means providing more extensive documentation or a longer track record of earnings. The team at Non Conforming Loans are experts at presenting your position in the best possible light that will appeal to lenders.

Illustrative Example:

John, a freelance graphic designer, found his mortgage application in jeopardy due to his variable income. By presenting a detailed income history and a list of long-term clients, he was able to reassure the lender of his financial stability.

  1. Age at the End of the Mortgage Term

Age discrimination is illegal, but lenders can decline a mortgage if they’re not confident you can pay it off before retirement. This is a particular concern for those in their 50s and 60s who may be looking at a 25 to 30-year mortgage term. It’s crucial to discuss with lenders how your income will continue into retirement.

Illustrative Example:

Susan, 55, applied for a 30-year mortgage. The lender was hesitant, but Susan provided proof of her robust retirement savings and investment income, which satisfied the lender’s concerns.

  1. The Property Itself

Sometimes the issue isn’t with you, but with the property. If the home you’re hoping to buy is deemed a poor investment by the lender – perhaps due to its condition or location – your mortgage could be declined. This is often a surprise for buyers who fall in love with a home’s character without considering its marketability.

Illustrative Example:

The Thompsons were initially declined a mortgage on a charming but dilapidated Victorian house. After obtaining detailed estimates for necessary repairs and presenting a renovation plan, they were able to secure financing.

  1. Too Many Credit Enquiries

Each time you apply for credit, a lender makes an enquiry on your credit report. Too many enquiries in a short period can signal financial distress to lenders. It’s wise to space out credit applications and avoid making several just before applying for a mortgage. This is why it’s in your best interests to speak to a top mortgage broker like Non Conforming Loans before you start purchasing or refinancing,

Illustrative Example:

Emma, eager to furnish her new home, applied for several store credit cards. Unbeknownst to her, this flurry of credit enquiries raised red flags with her mortgage lender. By explaining the situation and demonstrating her otherwise excellent credit management, Emma was able to proceed with her mortgage application.

  1. Unusual Financial Activity

Lenders scrutinise bank statements for red flags like large, unexplained deposits or withdrawals. These can raise concerns about the legality of your income or financial stability. It’s best to maintain a ‘business as usual’ approach with your finances in the months leading up to a mortgage application.

Illustrative Example:

Before applying for a mortgage, Raj received a large cash gift from his parents to help with the down payment. The lender questioned this significant deposit. Raj provided a gift letter from his parents, which clarified the nature of the deposit and smoothed the process.

Navigating the Mortgage Maze with Expertise

At Non Conforming Loans, we understand that the mortgage process can be daunting. Our team is dedicated to guiding you through every step, ensuring you’re prepared for all potential stumbling blocks. With our expertise, we’ll help you present the strongest possible application to lenders.

If you’re concerned about any aspect of your mortgage application, or if you’ve faced hurdles in the past, reach out to us. We’re here to help you understand the nuances of mortgage approval and to position you for success in your property journey.

Remember, knowledge is power – especially when it comes to securing your dream home. Let’s work together to turn your home ownership aspirations into reality.