What Happens if You're Declined on Your Home Loan Application?

I get this question every so often.

People have applied for a home loan and have tried more than one bank or financial institution, and in many instances, out of desperation, all the lenders available.

When I receive these calls and it's explained what's happened, the next logical questions I'm asked is:

- What now?
- Can you re-apply on my behalf?
- Is there anything else to do?
- When can I apply again?





These questions all really have interlinking answers, so let me try and put it in a logical order for you.

When you are rejected or declined for a home loan it is mostly for 3 reasons:

1) Affordability

When you are rejected in affordability it shows the lender that you cannot afford the mortgage loan.  This happens if you have either not completed all your expenses or if you haven't found out beforehand if you can actually afford to have that size loan.  An affordability decline can still be appealed if the information you have given the bank regarding your expenses differs from that what appears on the credit bureau.  If the credit bureau is erroneously reflecting information that is either not yours or an account that no longer exists.

2) ITC Listing

If you have had a credit problem in the past and there is a listing on your name you will not be able to appeal the decline.  Even if it has been paid up and you have the proof, 99% of banks and lenders will still decline your loan application as your credit record has to be clear.

3) Payment profile/Low Credit Scoring

The third most common reason home loan applications are declined is due to clients having a bad payment profile.  What this entails is if you've short paid an account or skipped a month.  No matter if you double up your payment the next month to make up for the short or skipped payment from the last month, you'll have created a bad or erratic payment profile for yourself.

The same goes for exceeding your credit limit on your overdraft or credit cards - these all contribute to lowering your credit scoring.

When this trend happens you create a low credit score for yourself.  You need to have a minimum credit scoring at each of the banks to be able to qualify - each bank has their own minimum requirement and together with their risk appetite you'll either meet their minimum scoring requirements or not.

As mentioned, these are the main 3 reasons that could or could not be appealed.

If you have been rejected for point 2 or 3 it could take quite a few months for this situation to be improved, and therefore more difficult to rectify.

The first point can't be appealed if the genuine reason is affordability and you cannot afford that loan.  You would then need to wait 3 months before applying again, or you would need to settle some debts to improve your affordability or find a more affordable property so that the home loan installment is lower.

These are the top tips and suggestions for you on how to handle being rejected.

For more information, visit:  http://www.gpfmortgage.co.za/