A mortgage application is challenging as it is and it’s especially frustrating when you find out that your application has been rejected. Your initial reaction might be to submit an application to other lenders, but this is something that you should think about carefully.
Your credit file will show a record of all the applications you make and submitting several home loan applications within several months can be a red flag to lenders.
So what do you do then? Read on and find out:
How to Manage a Rejected Mortgage Application
1. Be Realistic
It’s painful to see a dream shattered, but you need to start seeing things as they are rather than how you want them to be. Changing your expectations to fit reality will help you move on.
2. Take Time to Accept What Happened
Just like you would in the case of any disappointment, take the time you need to accept what happened. Take a few days off to process your disappointment, so that you can eventually get on with your life.
3. Think About What Went Wrong
Constructive thinking is an essential part of getting past a negative experience. Keep a record of all the things you did in a specific order and decide what could be done differently. For example, you might not have applied for pre-approval first to know how much you can borrow or maybe you didn’t raise enough money for a deposit.
4. Don’t Apply to New Lenders Immediately
Your credit file will show that you’ve applied to many lenders and that you have a history of applying frequently. This increases the chance that you’ll be declined for a mortgage again, as lenders will think that you’re a risk.
5. Change Your Strategy
Instead of applying to new lenders, find out what you can do to improve your current application. For instance, you might need to have your spouse listed as a co-borrower, especially if your spouse has a good credit score because this might help you get approved.
6. Seek the Advice of a Professional
A professional mortgage broker will be able to help you figure out the reason for your application being rejected. They will also be able to suggest ways to make your application successful the second time around and guide you through your next application.
7. Assess your Financial Situation
Some potential house buyers would commit to a mortgage loan even before fully assessing their financial situation. Having a clear picture of your current finances will help you make better decisions. For instance, the lenders might have denied your application because they can see that your debt to income ratio is not good or that you’re still paying off a car loan and a mortgage on top of that will be a huge financial burden that you might not be able to handle.
8. Make a Plan to Pay Off Your Debts
Any debts you have, such as a loan, credit card bills, and any other debts should be factored in when calculating your income and expenditure. Consolidating your outstanding debts into one loan will make your repayments more manageable and will help improve your credit score, too. As you know, your credit score is a huge contributing factor as to whether or not you will be approved for a home loan.
A mortgage application can be successful if you’re patient, persistent, and realistic. If you’ve been rejected for a mortgage loan, try to understand why you’ve been denied and use that knowledge to improve your credit score and chances of getting a home loan next time.
When you’re ready to apply for a home loan in Sydney, Wealthy You can help you. Get in touch with our team today to find out more about our mortgage solutions!