My home loan application was rejected. What now?

Having a home loan application rejected can be really disappointing. Don't panic though – it's certainly not the end of the road and you don't have to let go of your dreams of owning a home one day.

Understanding the reasons why your home loan application was rejected is really important when it comes to moving forwards with the process. Once you know what went wrong, you can start to make positive steps towards another home loan application in the future.

Reasons why your home loan application was rejected
There are many different reasons why applications for home loans might be rejected. Each lender has different criteria so often it won't be anything that you specifically have done incorrectly.

Here are some of the most common reasons why home loan applications are rejected;
• Poor credit score: this could be due to a number of factors but is likely to relate to defaults on your credit report such as previous unpaid loans or missed/late repayments. If you've been declared bankrupt in the past, this could also have a big effect on your credit score.
• Low deposit: not having a high deposit means that you'll be needing to borrow a lot more money than people who do have a good sized deposit. You'll need to look at the Loan to Valuation ratio and figure out how much deposit will give you the best chances
• Poor savings record: most lenders will want to see evidence that you not only have proof of a regular income but that you also have a substantial savings account. If you can't show this, your home loan application could be rejected.
• Poor debt to income ratio: again, lenders want to be sure that you can pay back your home loan. They'll look at how much debt you have compared to your monthly or yearly income. If the ratio is low it indicates you may struggle to pay back your home loan.

What to do next:
There are lots of things you can do to work towards a future home loan application success. Some of these might take more time than you'd like but getting a house is a big commitment and it'll be worth it in the end.

• Save up a big deposit: this will mean you're borrowing less money (which also means you'll be paying less interest) and you'll be much more likely to be approved if you can show your lender evidence of a larger deposit.
• Pay off all debts: you want to time your next home loan application for when you're in the best possible financial state. Make sure you pay off any outstanding debts, make all your regular repayments on time and don't make any loan applications in the meantime.
• Contribute to your savings account: try and put aside money in your savings account as frequently as possible. Showing evidence of this shows responsibility on your part which will appeal to a home loan lender.
• Keep things stable: if you're thinking about moving jobs, switching addresses or moving countries, put your plans on hold. You need to show that you have a regular income, a stable address and proof of residency to optimise your chances of getting a home loan approved.

Achieving your dream
Once you get back on track, the time will fly and before you know it you could be applying again for a home loan. Getting a home loan approved will feel really good, especially when you've worked so hard to make it happen.