Any risks in failing a loan application?

[Zeddy]

Two months ago I asked my mortgage broker for an indication of my borrowing capacity. He indicated that the budget for my next purchase should be around the $150k mark.

After some research, I've been attending opens for properties in the < $150k range. Last weekend I saw one with an asking price of around $140k that so far has ticked the DD boxes. I then contacted the mortgage broker to re-confirm the previous budget/borrowing capacity.

I've been advised today by my mortgage broker that my chances of having a loan approved are around 30%. The indicative limit he gave me previously has dropped by some 10-15k.

If I were to proceed with a loan application, are there any negative repercussions to being knocked back? Credit history marks? My impression was that a credit history check would only show a loan application, but not a rejection?

 

[Ergophobia]

Look at your options... If you get rejected you'll be no worse off than if you do nothing

 

[Rolf Latham]

Two months ago I asked my mortgage broker for an indication of my borrowing capacity. He indicated that the budget for my next purchase should be around the $150k mark.

After some research, I've been attending opens for properties in the < $150k range. Last weekend I saw one with an asking price of around $140k that so far has ticked the DD boxes. I then contacted the mortgage broker to re-confirm the previous budget/borrowing capacity.

I've been advised today by my mortgage broker that my chances of having a loan approved are around 30%. The indicative limit he gave me previously has dropped by some 10-15k.

If I were to proceed with a loan application, are there any negative repercussions to being knocked back? Credit history marks? My impression was that a credit history check would only show a loan application, but not a rejection?

Hiya Zeddy

There is a bit more to this than is obvious.

In my opinion, its wise to either

1. Avoid the app altogether, certainly if u were my client, and the chances of an approval were 30 %, Id say DONT, and fix whatever it is that u need to fix.

2. Find a broker that has a higher level of confidence.

While your enquiry on your file wont show as approved or not, subsequent lenders will draw their own conclusions.

A single enquiry or tow over 6 mths will usually not affect your credit score much, BUt................


ta
rolf

 

[Rolf Latham]

Look at your options... If you get rejected you'll be no worse off than if you do nothing

that depends...........

if this is enquiry X, and enquiry x dumps the OP over his credit score limit for whatever reason, and he needs lmi etc, he/she could be sitting on the benches for 6 to 18 mths

In isolation, yeah wont make much diff, but people files are NEVER isolated.

There is almost always more than is obvious


ta
rlf

 

[Aaron_C]

Did your broker say why it was only a 30% chance?

 

[Zeddy]

I own three properties, one of them currently considered as PPoR without rental income. I assume that it's the serviceability limit.

That suggests to me that at this stage I either have to sit and wait for rents to increase/wait until the PPoR is converted into an IP. It doesn't matter how much deposit I have if they won't lend me at 80% LVR?

I did own the third property (bought Dec 11) when he first gave me the indication of the loan limit.

Also he seemed a bit incredulous when I said the 140K purchase had a weekly rent of $200pw.

 

[Aaron_C]

I own three properties, one of them currently considered as PPoR without rental income. I assume that it's the serviceability limit.

That suggests to me that at this stage I either have to sit and wait for rents to increase/wait until the PPoR is converted into an IP. It doesn't matter how much deposit I have if they won't lend me at 80% LVR?

If you are heavy reliant on rental and are reaching the serviceability limit, consider going for a 2nd tier lender that takes into account 100% of your rental income for servicing. Your broker should know which ones are best - plenty of my clients have gotten over the line using this approach.

 

[Mick C]

I own three properties, one of them currently considered as PPoR without rental income. I assume that it's the serviceability limit.

That suggests to me that at this stage I either have to sit and wait for rents to increase/wait until the PPoR is converted into an IP. It doesn't matter how much deposit I have if they won't lend me at 80% LVR?

I did own the third property (bought Dec 11) when he first gave me the indication of the loan limit.

Also he seemed a bit incredulous when I said the 140K purchase had a weekly rent of $200pw.

SO it's a 30% chance of approval for the loan amount your after- not because you have a bad credit history or bad employment history etc...that's ok then..

As Rolf and Aron mentioned- if it's only a 30% chance then i wouldn't apply -instead fix the mistake ( ie may be easily fix by applying to a diff lender, killing off some credit card limits or applying for a different product type) then consider applying when your chance of approval is closer to 70%-99%.

 

[Rolf Latham]

Also he seemed a bit incredulous when I said the 140K purchase had a weekly rent of $200pw.

That speaks for itself doesnt it

time to move your investing Career beyond your broker maybe ?

ta
rolf

 

[Zeddy]

SO it's a 30% chance of approval for the loan amount your after- not because you have a bad credit history or bad employment history etc...that's ok then..

As Rolf and Aron mentioned- if it's only a 30% chance then i wouldn't apply -instead fix the mistake ( ie may be easily fix by applying to a diff lender, killing off some credit card limits or applying for a different product type) then consider applying when your chance of approval is closer to 70%-99%.

Update: After suggesting I cancel one credit card I don't use, and lowering the limit of another by 50% (capacity I never use) and saying my maximum offer is $135k, he's said I'm now over the line.

I don't have a bad credit history, and have had stable continuous employment for the past 8 years since graduation, so I'm fairly sure it's serviceability.

 

[Mick C]

If it was a simple case of killing off some credit card + lowering the limits...why didn;'t your broker jsut tell you that! lol....

 

[BMan]

If it was a simple case of killing off some credit card + lowering the limits...why didn;'t your broker jsut tell you that! lol....

more so why didnt the broker suggest he do that when he first when into him and asked...

 

[Aaron_C]

more so why didnt the broker suggest he do that when he first when into him and asked...

...because some clients are addicted to having high credit card limits. Besides, if you aren't refinancing the credit card debt you don't have to show the CC statements so the bank doesn't know your true CC limit. And even if you chose to tell them, you can mitigate it by showing that you hardly use your CC over a 3 month period etc.

 

[Zeddy]

I've just used him to refinance 3 loans, so he's well aware that my credit cards are always paid off in full and have low limits.

The only reason I have a higher limit on one is because it came with the new loan/banking package, and I haven't got around to lowering it. I'll do that today.

I suspect it could be because he didn't think I'd actually try purchase with a borrowing capacity "that low".

 

[Bradsdad]

Ummmmmmmmm, How on earth did he get to the conclusion it was a 30% chance? He either believes servicing is evident or not. If he can't be lodging an application that he believes should be approved then what hope is he of going to bat for you if the going gets tough?????????
The only reason he shouldn't be 90%+ sure is if income/employment/credit history etc is outside of the lenders (or LMI's) standard guidelines. From what I can see none of these have been raised as an issue. This now raises the question on how many lenders he has compared and maybe even more scarier, how the refinances were structured in the 1st place given you intended on sourcing another property.

In saying this there's always the chance you may be biting off more than you can chew and if so he/she should have mentioned this earlier.