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HomeFINANCEFailed home loan? What to do to get past this answer

Failed home loan? What to do to get past this answer

When you use a home loan, so that it is not disapproved, the bank needs to be sure that it is able to pay the loan. Although, the necessary conditions are not always met and, therefore, your request ends up not having a “green light”.

Even if this can happen, it doesn’t mean that you can’t fulfill your dream of having your home. Here are some ways to improve your situation and request a reassessment.

Start by understanding why your credit failed

First of all, you should start by knowing that reasons that led to your credit application being disapproved. Only then will you be able to establish a plan that allows you to get where you want. There are several reasons why a bank might say “no”. Since the low incomes, current debts, professional instability, until the credit maturity itselfall these factors weigh at the time of granting.

After the recent announcement of the entry into force of the new rules for granting housing credit, the age factor began to have another “weight” in the analysis of your application. Therefore, it is essential realize what really “failed” in your order.

Also read: 3 reasons to review your home loan

Increase your income

One of the most effective ways of solving credit granting problems is through a increase in your income, as it causes your effort rate to decrease. However, you should always consider your financial stability. Increasing your income is a good strategy, as long as it is sustainable and consistent. If this increase in income is only seasonal or temporary, it can lead to difficulties in the future.

When taking out a loan, especially for the purchase of a home, you are committing yourself over a long period of time. This means that, if your earnings are not stable, your effort rate may be high, putting you at risk of default.

Therefore, increasing your income may not be enough. For example, if you are already 55 years old and need a home loan, it means that the loan term will be only 20 years. Although you can have good income, if the credit value is high, there is no other way than to increase the down payment to reduce the installment. Otherwise, it is very likely that the credit is disapproved due to the effort rate.

Also read: How to prepare for interest rate hikes on home loans?

Reduce or completely eliminate your debts

Another reason that may lead the bank to reject your request is related to a too much debt scenario. Regardless of whether they are loans for the purchase of a car, credit card debts, or personal debts, all these expenses are taken into account. These additional costs have a direct effect on your effort rate. If your income is low, any additional expense is a drag on the bank.

There are several ways to reduce or completely eliminate your debts. First, you need to identify which debts you want to pay off first: the ones that have a higher interest rate (a strategy called the “avalanche method”), or those that you owe less money (“snowball method”) . Decide which one is most comfortable for you, as both can have advantages and disadvantages.

if you prefer to see results quickly, you should start by paying off the debts on which you owe the least, although there may be others in which he is being more financially penalized. That way, you can stay focused and know you’re on the right path. At the same time, You must set a budget in order to reduce unnecessary expenses and direct this amount to pay off your debts.

Also read: Map of Credit Responsibilities: What is it and what is it for?

miniature house inside a shopping cart.  At the side is a graph with the evolution of the costs with the house.  The rise in Euribor increases the charges

Improve the stability of your professional situation

Yours professional situation it is one of the factors that the bank assesses to determine whether there is a risk of default. Therefore, if you have an unstable job or with variable income, you will certainly face difficulties when granting credit.

For example, a history of stable earnings during, at least two consecutive years is a good indicator. O type of contract, that is, whether it is effective in the company or not, also influences in the decision. So, if you know that your credit application has been denied because of your professional situation, there are not many alternatives but to wait to become effective in your current company, or look for another job that offers you stability.

Read also: Differences between simulation and pre-approval of Housing Credit

increase input value

Take a Superior initial down payment can solve your problems in granting credit. However, it requires a greater financial effort. The vast majority of banks require around 10% down payment.

For that reason, before visiting properties you should be sure about the amount you already have and the maximum amount of credit you can borrowdepending not only on their income but also on this available value.

Also read: Do I need to have a property chosen to apply for a home loan pre-approval?

Negotiate housing price

One of the solutions to overcome failed credit also involves negotiation of own housing price. The more expensive it is, the more down payment you have to give, which in turn implies having higher income to support the loan. If you have the ability to negotiate the price, then you should. Not only does it save money, it makes it easier to get the home loan you need.

There are several reasons to negotiate the price, starting with state of the property. Asking the owner about the maintenance (plumbing, for example) that the house has had, possible problems with the neighborhood, reasons why the owner is selling, are some of the points where you can negotiate. The better you know the owner and the property, the more likely you are to get a better price.

For example, if the owner is selling a house, as he needs to make money to buy another one, then he has room to negotiate. Especially if the house has been on the market for a while, you can use this to your advantage. However, there are no guarantees that the owner will lower the price. Still, try to negotiate, it all depends on the arguments presented.

Also read: Advantages and disadvantages of using a credit intermediary

Can you really afford the house you chose?

Before going ahead with the business and going to your bank to start the credit granting process, you must make sure you can afford housing. While she may have found her “dream home,” that doesn’t mean she’s ideally placed to take on this responsibility.

Therefore, you must measure the risks and assess whether to proceed with the purchase of the house. The price of the house, the amount of credit applied for, the term, everything must be weighed. Also, the price you pay today for your home doesn’t end here. Depending on the house, it may require a lot of maintenance effort.

Also read: Want to buy a house with housing credit? 7 precautions to take

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