8 Red Flags For Lenders When Looking At Your Home Loan Application

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“Let’s talk about finances” isn’t exactly the most popular phrase spoken at Friday night knock offs.

The reality is, it’s important.

If you don’t feel comfortable talking to your friends about why you got rejected on your home loan application, here’s a simplified guide on 8 possible reasons the bank declined.

Your Lifestyle

The size of your salary isn’t the only factor, but also the size of your lifestyle. If you’ve been living large, chances are the banks won’t be fooled into thinking you’ll give up boozy nights out or start making your own lunch.

It’s no longer a simple matter of weighing up if you can pay off a home loan, but determining if it’s realistic with your lifestyle.

Ask yourself this: how much of your income do you spend per week on living your best life? If you don’t have much leftover to put towards a home loan, maybe it’s time to reconsider your needs and wants.

You Got a Hefty Inheritance

The banks don’t care if you landed a decent inheritance, your parents helped out with a deposit or even had an epic win at the casino. The most important factor is your ability to save.

The banks may investigate your spending behaviours via transaction records to determine if you can afford the mortgage yourself.

Your Credit History Isn’t Flash

It may seem like a no brainer, but failing to meet bill deadlines or other loans is going to raise major red flags. While you can’t remove history, you can make positive changes. If you can prove more than two years of good credit history, the bank may just forgive you.

You Don’t Have a Credit History

No credit history is better than a bad one, right? Well, no.

Choosing not to have a credit card is a safe option for people who want to avoid overspending, however the banks need to see if you are capable of meeting payment deadlines.

While being money wise is a good thing, it’s best to have one or two credit histories to show you are capable of the pressures that come with paying off a home loan.

You’ve Had Several Jobs in the Past Three Years

Job stability is a major factor towards receiving a home loan. As a general rule, banks prefer the borrower to be employed by the same employer for no less than 3 years.

You Don’t Have a Stable Income

If you get paid via commission or perhaps do shift work, the banks may be more cautious. A stable monthly income is favourable, however you can show a number of months to grasp an average.

You Forgot to File Your Tax Last Year

Considering it is the law to file your tax every financial year, there’s no surprise the banks want to see a clear record.

Luckily they don’t normally check beyond two years, so if you were a bit slack in your early adulthood, you can still get the seal of approval.

Your Eyes are Bigger Than Your Earnings

We’ve all heard that one before, but buying a luxurious watch doesn’t involve the same commitment as buying a house.

The reason for a home loan rejection could be as simple as assuming you can borrow more than you think.

It’s worth arranging an appointment with a broker to determine a rough guideline of what to expect.

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