Searching for that perfect property can be frustrating and time consuming so imagine the disappointment you would feel after making the final decision to buy, then being rejected by a lender when you applied for a loan. With all sorts of emotions and thoughts going on, it would be easy to immediately apply to another lender, but this would be a mistake.
We advise our clients to find out how much they can borrow before they start looking so they know what they can afford. This is where the question of a credit score becomes important as the lender assesses their capacity to repay a mortgage. It also makes it easier for our sales staff at Position One Property to show them properties in their price range.
Rejected for a Home Loan? Find out Why
If you have been rejected for a home loan, the first thing to do is to find out why. If one lender has already rejected an application, the chances are that others will too, for the same reasons. Being rejected by multiple lenders will have an adverse effect on the credit score which is not what you want. Instead, you need to know how to improve that credit score so the next application is approved.
We suggest to clients in this position that they source a credit repair expert to check their history for any defaults that have been incorrectly assigned to their record. This person can also help with the process needed to get these removed. While this is happening, check personal credit habits like overdrawing on credit cards. This is a clear sign that you are not living within your means. Make sure you pay off any purchases every month.
Keep Your Credit Record Clean
It seems obvious but we need to say it. Pay all your bills on or before the due date and pay off any defaults found on your credit file. Moving house and changing jobs are also behaviours that raise red flags against your name as far as lenders are concerned. Stay in the same job and at the same address until your mortgage is approved. If you have not developed a regular savings habit, start now and have, at the very least, a three months history of regular savings of reasonable amounts.
A Little Pre-planning Goes a Long Way
Depending on the state of your credit history, this may be a long-term project rather than something you can fix quickly. This is why we suggest to our clients that, if they suspect their credit score is not as it should be to get a home loan, they should first focus all their efforts on establishing good spending and saving habits.
At Position One Property we like to help our clients find the home of their dreams. A little thinking and planning before looking for a mortgage lender will make the search so much easier.