4 Reasons Why Lenders Won’t Approve a Mortgage Loan on a Propertyadmin
A home purchase is an exciting time in anyone’s life. But before you can make your dream purchase, you have to jump through a few hoops. Unless of course, you are fortunate to be sitting upon a large sum of money which, let’s face it, most of us are not. This leads us to the question, just how easy is it to secure a mortgage, and what are the main reasons why lenders won’t approve a loan on a property? This article dives into the logistics of it all, so keep reading to find the answers.
Your Credit Profile and History
The success of a mortgage application hinges on your credit profile, so what is that exactly? A credit file is a complete account of all of your financial interactions throughout your adult life. It contains records around credit applications, voting registrations, address history, and how you have managed your money in terms of paying loans, bank accounts, and overdrafts.
You can get a good credit score by:
- Always paying your bills on time
- Never missing a payment and therefore defaulting on accounts
- Not spending money/surviving on the overdraft of your bank account
- Not having multiple lines of credit at the same time
- Only making credit applications when necessary and not multiple in quick succession
- Registering to vote
Whereas, you get a bad credit score by:
- Defaulting on credit payments such as loans and credit cards
- Having multiple lines of credit against your name and therefore owing too much money
- Not having a fixed abode
You May Have Too Much Debt
One thing we touched upon with regards to your credit history and profile is how much total debt you owe. Debt does not necessarily mean missed payments; it pertains more to the total sum of money you are liable for with regards to creditors. If this figure exceeds your credit score and makes it look like you won’t be able to either afford further borrowing commitments or qualify for another loan, then you will be automatically rejected. To get past this barrier, you need to pay down, or preferably completely eradicate any debt associated with your name.
Too Many Recent Credit Applications
Another factor that will put mortgage lenders off is how many recent attempts you have made to borrow money or secure finance. It doesn’t matter what the reason is, if your name links to multiple (over five) applications for loans, credit cards, car loans, or even overdrafts, then this paints an unfavorable picture with any potential lender. This will only lead to a rejected application.
Before you start your mortgage application, it is important to ensure that you are at least six months in the future from any attempts to secure credit. This shows a greater responsibility on your part – as potential lenders will call into question why you have applied for so much credit in the first place. It presents as desperate on paper and a person who mismanages their finance in a way that makes them depend on loans and other types of borrowing for the basic finances of life, such as rent and other bills.
Your Salary Is Not Sufficient
To secure a property in Singapore, your salary must match or exceed the mortgage lender’s criteria. A good way to see if you meet the requirements is by using a mortgage calculator from a site like PropertyGuru. You put in your details such as employment, address, and salary and get a potential outcome figure and probability. If your wage is not high enough, you will not qualify at this time. Some ways around this are to raise a higher deposit (down payment), get a higher paying job, consider a joint application with a partner, or look for a house with a lower price tag.
What to do If You Get Rejected for a Mortgage
There are steps you can take to secure a mortgage in the future if you have been rejected recently. The first thing to do is to give it time, as frustrating as that may be to hear. Time to rebuild and regroup your financial profile can show lenders how you have taken charge and taken responsibility to become a more attractive lending prospect. Secondly, pay off all your debts so that when the time comes you have a clean slate to work with. Thirdly, make sure that your savings are big enough for the deposit so that your salary can meet the lending criteria. The more money you have to put towards a potential property purchase, the less you have to borrow at the other end.
If you cannot secure a mortgage currently, there is no point in despairing. Though it may be a disappointment initially, it should be seen as an opportunity to grow and nurture a more attractive financial profile. If you put the work in, and tick the right boxes, then you can try again a few years into the future and hopefully have success.