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Aveling Homes Explains Why Some Loans Get Rejected
by
Paul Joyce
Today lenders are being more particular about who they work with. Borrowers must meet certain standards to get the best loans. Future homeowners need to understand the thought process behind lending. Aveling Homes wants to help explain the top reasons loans are declined.
It s no secret that the global financial crisis changed things. Everyone is more cautious about who they do business with and this is especially true with lenders.
Getting a loan isn t as easy as it once was. This might be good for the economy but it can be rough for first time home buyers. Here are some of the top reasons that loan requests are denied. Those who understand why loans are denied will be in a better place for getting theirs approved.
Lack Of Savings
People are more likely to give money to people who already have money. Those who are able to save money are in a much better position of having their application approved.
This is the reason that loan to value ratios are important. Every buyer should save up at least 5% of the total home value, though 20% is ideal. Loans higher than 80% usually involve mortgage insurance premiums.
If something goes wrong those with savings have something to offer lenders. Contrary to popular opinion most lenders do not want to drive borrowers bankrupt. After all, those without money have trouble making payments.
Insufficient Credit – No Steady Source of Income
A loan is a long term commitment and it s not just about being able to pay today. If there s any doubt about a person s ability to continue paying off their debts then they may be turned down.
Those with no steady income and employment, those just starting out will have a harder time getting a loan. Lenders prefer to deal with people more established.
Financial History
One of the first things lenders look at is credit. Those with bad or no credit have a hard time getting a home. Credit history is used as an indicator of how a person will treat future loans. Those who haven t proven themselves capable of handling small debts are hard to trust with larger ones.
Lenders try and take everything into consideration. All past defaults and existing debts will be carefully reviewed to assess creditworthiness. Like most things in this world reputation is key. Banks are more likely to lend to those who they have successfully worked with in the past.
They will probably turn down those who have a less than stellar track record. Those who have a bad history need to take the time to turn things around and save enough for a sufficient deposit.
The Bottom Line
A loan isn t just a risk for the borrower, lenders are also taking a chance. Those who understand this will be better prepared when shopping for a loan. When it comes to finance knowledge is power. Those who understand how lenders work will be in a better position to get their own loan.
Anyone who wants the best loan possible needs to prove that they are trustworthy. Home loans are a big investment for everyone involved. Borrowers need to show that they are a safe bet.
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Aveling Homes Contact Information
24/7 Metro Sales: (08) 6144 1000
24/7 Sth West Sales: 6144 1001
Metro: sales@avelinghomes.com.au