Getting a loan application rejected can feel like a real setback, but don’t stress—you’re not alone, and there are plenty of ways to turn things around.
When you work with More Than Mortgages, we go above and beyond to minimise the chances of rejection by tackling potential issues before your loan application is even submitted to the lender. We make sure your application is presented to the bank at its absolute best before submitting it. In fact, if we think there’s a big risk of rejection, we won’t submit it—this would be a waste of your time, our time, and would also negatively impact your credit score.
In saying that, let’s break down what happens if (in the unlikely event) your loan application is declined and what your next moves can be.
Understanding Why Your Application Was Rejected
The first thing to understand is why your application didn’t get the green light. There could be a few reasons, including:
- Credit score issues: Lenders use your credit score to assess how risky it is to lend to you. If your credit score is low, this can be a common reason for rejection. It might be due to missed payments, high levels of debt, or a short credit history. At More Than Mortgages, we order a copy of your credit report well in advance of submitting your application, so if your credit score is low, we’ll be able to offer you advice on how to improve it.
- Income not meeting requirements: In finance jargon, this is called “lack of servicability”. Sometimes lenders will say your income isn’t enough to cover the (buffered*) loan repayments.
This can be particularly tricky if you’re self-employed or have irregular income (casual, overtime, shift work, bonus or commission income). All lenders have different policy in the way they’ll assess your income. At More Than Mortgages, we make sure to get the bank policy in writing, prior to submitting your application.
*Lenders will usually add 3% to the actual interest rate, to account for any future rate-rises. - High debt-to-income ratio: In finance jargon, this is “DTI”. If you already have too much debt compared to your income, lenders may worry that you won’t be able to handle more. Most lenders will start to scrutinise your application with a DTI over 6, i.e. the loan you’re ap0plying for is over 6 times your total household income.
- Incomplete or incorrect information: Any errors or missing information on your application can result in rejection. Double-check your paperwork before applying again!
What Can You Do After Rejection?
If your loan application gets knocked back, don’t let it get you down! Rejection doesn’t mean you’ll never be approved—it’s just a chance to reassess and come back stronger. Here’s how you can bounce back:
- Ask for Feedback from the Lender
Find out why your application was rejected. Whether it’s your credit score, missing documents, or something else, understanding the “why” helps you focus on the fixes. - Check Your Credit Report
Get a copy of your credit report and give it a good once-over. Mistakes happen, and they can mess with your application. If you spot any errors, get them sorted ASAP. - Work on Your Credit Score
If your credit score’s the culprit, take time to boost it. Pay bills on time, chip away at any debts, perhaps engage a “credit repair” company (if you have defaults), and hit pause on applying for more credit while you rebuild. - Adjust Your Loan Application
Maybe the loan amount was too high, or your debt-to-income ratio didn’t meet the banks policy. Tweaking your loan amount, term, or type could make a big difference. - Explore Other Lenders
Just because one lender says no doesn’t mean they all will. Different lenders have different criteria, and a mortgage broker can help match you with one that suits your situation better.
Reapply When You’re Ready
Once you’ve tackled the issues, you’ll be in a much stronger position to reapply. Don’t rush it—take the time to get everything in order so you’re ready to nail it the second time around.
Need Help?
We’re here to guide you through the process, boost your chances of approval, and help you find the perfect solution for your needs. Give us a buzz on 02 6188 4555 or make an appointment for a free consultation today. Let’s make it happen together.
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