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Debt Consolidation Bad Credit Loans Home Loans

10 Reasons Your Home Loan Was Denied

Most people believe a good life is having that killer home and a stable job. But what happens when you try to apply for a loan and get rejected?  It can become increasingly disheartening to hear the same 9 words –  “we are sorry your loan application was denied.” In this article, we dig deep and reveal the reasons why your home loan was denied.

Understanding the reason behind your loan denial is a valuable learning experience. This reason helps you to pinpoint the areas of your financial life that need to be polished. You can always improve on this and reapply for the funding.

 Let’s dive right into the ten reasons why your home loan was denied

Poor Credit History

Credit history is simply a record of a borrower on debt repayment from several sources, including banks, collection agencies, or credit card companies. Potential creditors such as the Australian Lending Centre and other mortgage lenders use your credit report or information to decide whether they will give or deny you a loan. Your credit information is the right way for lenders to tell whether you are a risky investment or not. Having a poor credit history will deny you a home loan.

If you check your credit score and you find that you have defaults, blackmarks or court judgments, it is highly recommended that you remove these otherwise you will struggle to secure funding. There are specialised credit repair agencies that can assess your credit situation and work towards removing these negative listings.

Insufficient Income/Asset Documentation

One of the big reasons why your home loan application may be denied is due to your income or debt ratio. Your income is an excellent measure of whether you can or cannot afford the home. ALC is likely to enquire about your assets and, more specifically, your liquid assets. They’ll want to identify what you have saved to raise a down payment, pay closing costs, and make monthly loan payments once you close your loan.

You have to make sure that you have sufficient income or assets before you apply for a home loan. It is essential to have your resources in a certified account, at least two months earlier, to applying for a home loan. It is because banks and lenders regularly ask for your two latest bank statements. Also, make sure you verify your assets for a down payment, closing costs, and reserves.

Down Payment is Too Low

Typically when you buy expensive things on credit, you need to make a down payment. The down payment amount usually covers a portion of the market price of the home. Lenders look at the upfront amount as an investment in their future home. A low upfront may not put their minds at ease. To certify your home loan application, consider having a more significant down payment, or else your home loan will be declined.

Problems with the Property

Sometimes you are not the cause of a home loan denial. It is not always your fault. Your home loan denial may be due to problems with the property you want to purchase. Therefore before you apply a loan for a particular home, do thorough investigation and research about the property.

Inadequate Employment History

Your employment history is essential when it comes to a home loan approval. You should have a consistent job history when applying for a mortgage home loan. Most lenders will consider two years of steady employment history to process your loan. By doing so, they only want to be assured that you can hold on to a job long enough to repay the debt. Make sure to keep all your payslips and any tax information. You will want to make the process as easy as possible for lenders.

Inaccurate documentation

Home loan lenders want to know everything about you, and therefore, leaving out any information may raise the alarm. It is always good to provide all the required details and fill out all the sections on application forms.

Reduced Debt to Income (DTI) Ratio

Most lenders look at DTI Ratio before awarding a home loan. DTI Ratio is simply a sum of your monthly payments divided by your monthly income multiplied by 100%. You should always aim at 45% and below.

Unpaid Taxes

Taxes are significant to a country’s income. A due fee is another debt that can haunt you. It can lead to a robust rejection of your home loan application. Make sure to work through old debts before applying for a home loan.

You Asked for Unreasonably Low Loan

Most lenders give loans based on how much interest they will make. The lower the investment, the lower the benefit they will gain. Therefore, you should understand that lenders make money from interests that are higher on high loans than small loans. They factor their profit against their risk, so it is unlikely for them to approve a low loan request.

Bulky transactions

Just like receiving huge money, large transactions may raise red flags when applying for a loan. You should not make large transactions as you near a home loan application period. Stick to low operations and always be ready to explain the purpose of the transactions. Valid documents should accompany this.

Final Thoughts

Now that you have learned and you are well aware of the reasons that can lead to your home loan denial, you only need to rectify what is dragging you behind.  Make sure that all the above are taken care of before requesting a home loan, or else it can get rejected. If your loan is denied, remember it is not the end. Focus on building positive financial habits that will help you increase the likelihood of securing a loan.

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Home Loans

What Happens When You Default On Home Equity Loans?

If the value of your home, or the amount you paid for it, is higher than your first mortgage or the principal, it means that you have equity in your home. You can tap into your equity by applying for a loan, secured by it. These can be a great option to acquire finance, but what happens if you default on home equity loans?

Here are the consequences if you default on home equity loans

1.The account will be sold to a collection company.

Unlike what other people think, foreclosure is usually not the course of action home lenders choose to recover the amount you owe. When you default on your debt, your lender may sell it to a collection company who will take it from there. They will call you, send collectors to your door steps or send demand letters to attempt to recover your outstanding balance.

standard-lawsuit2. Standard lawsuit

If the second mortgage holder decides not to foreclose, can it still recover the money it has lent you? Yes. In an attempt to recover payments, the lender may file a standard suit against you. It is less scary than a foreclosure where you will lose ownership of your home, but it can seriously hurt your credit score.

3. Foreclosure

In case of default, the holder of your second mortgage may initiate a foreclosure to recover the money it lent to you the moment your house is sold at a foreclosure sale. Since mortgage is a senior lien which takes priority over a home equity like a second mortgage (because the loan was registered earlier) the first lender gets paid first. But, what if you refinanced the loan—does it mean that the second mortgage lender becomes the first priority? It depends. Whichever lender has the certificate of title will be entitled for the payout first. If you were in the process of refinancing but it was never complete before the foreclosure on the property and you didn’t pay the previous lender out, they are not eligible for the funds. If your previous lender still holds the certificate of title, then they are the ones who need to be paid out.

avoid-consequences

Here are tips to avoid the above-mentioned consequences of not paying your home loan on time…

Don’t hide from your creditors.

They will not be so enthusiastic in working with someone who avoids their calls, ignores their letters and refuse to cooperate with their offer to help for a few months. Remember that most mortgage lenders will work with borrowers who are struggling to make payments to encourage payment. So, if you’re missing payments, contact your lender right away. Inform them about your current financial situation and express your willingness to work out a repayment plan suited to your condition. Your lender may modify the terms of your loan, lower or raise the interest rate, increase or decrease the monthly payments, depending on your situation and financial capacity. It can also be a combination of the abovementioned options to make the home loan more affordable.

Explore available options to avoid foreclosure

Are you struggling to make your second mortgage payments? If foreclosure is imminent because of default, check out some of the alternatives to foreclosure that Australian Lending Centre offers:

If you want to consolidate your debts into 1 easy-to-pay, low-rate loan with low monthly repayments, get your finances back into order with a debt consolidation loan. Learn more about home equity loans and the suitable financial solutions available for you by calling 1300 138 188 today!

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Mortgage Financial Fitness Financial Planning Home Loans

Will My Car Loan Affect My Mortgage Application?

A car loan can help you a lot if you plan to get your next car faster. However, a car loan can affect your mortgage application or other types of significant loans. If you are planning to buy an expensive car, this means that you will require a large loan. That car loan can impair your future borrowing power. But this doesn’t mean that you need to choose just one of these two.

Let’s see how a car loan can influence mortgage applications and how we can deal with such a situation.

First Things First

When you apply for a home loan, you will need to provide information regarding your financial status. This means that you will have to give documents regarding your monthly income, assets you own and other ongoing payments. This is how a lender will determine whether you can pay back the loan or not. Every lender wants to avoid doing business with people who might not be able to keep their word because of their financial problems. They want profit, not excuses.

If it were a personal loan, your mortgage application would be fine. But since we are talking about an expensive car loan, your mortgage application might get rejected due to your other massive loan. Either that or come with a lot of restrictions.

mortgage-application

Will My Car Loan Affect My Mortgage Application?

A car loan will have a high impact on your finances. Given all the taxes you need to pay, a car loan can take most of your monthly income. Still, aiming for a cheaper car might be of some help. Since cars tend to lose their value quite quickly, getting a very expensive one may not be a good idea, especially if you intend to apply for a mortgage.

Mortgage applications will act the same so that you will be left with little to no money. This is why a lender will probably have to refuse your mortgage application.

A lender wants to know that you will pay your mortgage and you won’t default on it. He will analyse your assets and other methods of income. If he sees that you have the financial power to afford a car loan and a mortgage at the same time, he might give you the green light. If not, it might be better for you if you only had one.

Defaulting on a mortgage is not a good sign for your lender and your finances. Car loans and home loans can quickly turn into uncontrollable debts, and you might end up losing everything. So don’t think of the lender as the bad guy, but be objective and calculate what you can and can’t afford, because in the end, if you are dishonest, you will suffer the most. Because banks and lenders make sure they never lose.

eligible-for-loan

Can I Still Be Eligible for a Mortgage Application?

Yes, you can. Your car loan will affect how much you can borrow, but if you don’t want an expensive house, that a limited amount of money can be just enough. If you can’t get the sum you need, you can search for an affordable home. When it comes to loans and money, flexibility is a must.

If you want to increase your chances of getting your mortgage application approved, then it’s time to clean a little bit of your credit file. Pay your debts and try to repair your bad credit. Also, consider debt consolidation as a possibility. Lenders will check your credit to find out who they are dealing with and also what other assets you own, just in case they might have to make up for that loan with something else rather than your money.

Having a savings account is a great idea. It makes you more trustworthy and responsible in the eyes of your lender. Let’s not forget that having some savings might help you quite a lot to reduce the amount you would apply for.

Also, try to talk to your lender. The more information he gets regarding your situation and income, the bigger the chance of getting your request approved. Don’t forget to tell him your exact plans.

suitable-car-loan

Final Thoughts

So, the short answer is that a car loan can influence mortgage applications and under certain circumstances, it can get your requests denied. But do not let yourself discouraged. Evaluate your possibilities, cut down on the unnecessary expenses and, if you can, try to pay ongoing debts before applying for a mortgage.

You can talk about these details with Australian Lending Centre. Our friendly consultants will tell you about your chances of receiving a loan and, if you fit our criteria, you may even get a good mortgage option. Advice never harmed anyone so you should not miss the chance of clarifying your options face to face with an expert.

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Mortgage

The Reality of Mortgage Repayments

In spite of the loan solution you carefully select, you should comprehend the way in which a loan works, and what it implies. Understanding the reality of mortgage repayments is the first step to making the right decision to fit your financial status.

Understanding Interest

Recently, Australians have benefited from low and attractive interest rates. So, how does this influence your mortgage repayments? Mortgage providers grow or diminish their rates, to mirror the movement exercised by the set cash interest rate. At the moment, interest rates are estimated at around 4.5 per cent, depending on the lender.

Although selecting fixed mortgage repayments over variable ones might seem the right choice, as it protects you from fluctuations, some other aspects should be considered. If you’re locked into a variable home loan, when the cash rate lowers, your interest will also decrease. Even though this is an unmatched advantage, Aussies should know that low rates don’t plan on staying this way forever.

To grasp the way in which this phenomenon influences your mortgage repayments, hear us out. A standard variable rate for a 25-year old loan of $200,000 would have a $1112 monthly payment, with 4.5 per cent interest rate. If this would change with as little as one per cent, it will either rise to $1228 or diminish to $1001.

Also, bear in mind that, over the life span of a loan, fluctuations may reach $100 per month. What we’re trying to say is that you should embrace a repayment plan with the right contingency measures, in the case in which the interest rate spikes.

When the Loan Matures

You should also note that the market conditions are due to change. That is inevitable. In this respect, you should take advantage of whichever opportunity you have to refresh your financial approach. An option might be to discuss with your financial advisor. But, before doing that, there are some solutions for adjusting your mortgage repayments:

  • Refinancing: When the interest rates are low, you can always consider refinancing. That may be a more convenient option. Even though there are exit and entry costs that should be factored in, as a general rule, you’ll recoup those expenses over the life of the loan.
  • Pay ahead: If the interest rates are low and your budget enables you, you should consider getting ahead on your mortgage repayments. If you manage to make a considerable repayment during this time, not only that you will decrease your overall loan balance, but you’ll save a lot on interest rate payments.
  • Fix your loan: If your credit conditions are permissive enough, we advise you to lock in the new low rate.

To conclude, comprehending the market conditions does pay off. When you sign a loan agreement, you should know what it implies, how the market is due to change and how it can affect you.

In spite of your current status, don’t hesitate to refresh your mindset, in the case in which the market alters in your favour. Why shouldn’t you take advantage of it? Nonetheless, bear in mind that you should discuss with your financial advisor before taking the leap.

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Refinance and Refinancing

Desperate Mortgage Stress Fuelled by Rate Hikes

Australian home owners are falling into increasing despair as interest rates continue to rise. Mortgage stress is hitting hardest even in what are deemed the more affordable parts of state areas.

As home owners struggle under the climbing mortgage repayments nation wide, more and more Australians are falling into debt. New figures released by debt collector and credit reference group Dun & Bradstreet expose a sizeable 12% increase in the number of debts referred for collection in 2007. Struggles to meet these mortgage repayments have ensured “unprecedented levels of bankruptcy and repossession and loan defaults” as Australian Property Monitors general manager Michael McNamara stated.

Mr McNamara described “Property prices have increased 250 per cent since 1996 but mortgage debt increased by five times in the same period.”

With so many Australians living on the knife’s edge, it is of no surprise people are looking for ways out. Loan Market chairman Sam White advised struggling borrowers to “consider re-financing” before it becomes too late.

If you need assistance with refinancing your mortgage debts, ALC can help. Contact us now on 1300 138 188.

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Interest Rates

Homeowners Sigh Breath of Relief as Interest Rate Rises Halt

Homeowners Australia wide have sighed a breath of relief this month, as the Reserve Bank did not raise interest rates. There has been an ongoing climb in interest rates, with 12 steady rate hikes since 2002. This month signals the first time the RBA has remained static in 6 years.

As Icap senior economist Matthew Johnson discerned recently, “The bond market is saying pretty strongly that the RBA is not going to raise interest rates”. This is welcomed news for home owners struggling under the increasing pressures of mortgage repayments.

The stresses of mortgage debt is a wide spread problem across the nation, with homeowners’ living budgets suffering as they struggle to meet house basic repayments. The end to the rate rise crisis momentarily gives a cautious optimism for Australians.

If you are struggling under the rate rises and are falling into mortgage debt, ALC can help refinance your repayments into one easy monthly sum. For more information on the options right for you call us now on 1300 138 188.