Why Can’t I Get A Property Loan? (Ep63)
Sometimes it can be very difficult to get approved for a property loan. So why are you getting knocked back? What are some of the things that are holding you back from getting a property loan?
Today we’re talking about loans and more specifically some of the things that might prevent you from securing a property loan. Some of these things you might never have thought of or never understood that they would stop you from getting an investment loan.
But it is important to understand these things and then take the steps necessary to put yourself in the best position to get approved.
So let’s have a look at seven things that might be stopping you getting that loan approval you so desire.
Large credit card limits
I’m not talking about large credit card debts. That would obviously hold you back from getting a loan. But large credit card limits will also hold you back.
Even a $20,000 credit card limit with no debt will hold you back from investing in property. It might mean that your loan is declined or you can only get a smaller loan approved.
The reason for this is because the bank will automatically expect you to fill your limit. They’re looking at risk versus reward. And a limit of $20,000 could easily be squandered or gambled away. Your money would be gone and you would now have a $20,000 debt.
The bank will look at credit card limits as if you had that debt. They will also look at the amount of money you would have to be paying each and every month to cover the interest on those credit card loans. So high credit card limits can easily hold you back.
Banks like to invest in secure people who have had jobs for a significant amount of time. If you have just changed jobs then you could be in a probationary period of three to six months. You could otherwise be seen as unstable by the banks.
They might wait until you’ve been at the job for at least six months – or maybe even two years – before they’ll be willing to give you a loan.
Interest free financing
The banks will look at any purchases you have made on interest free financing. This may hold you back from getting a loan.
It doesn’t matter if you plan to pay it off in time before the interest kicks in. The banks will look at what you would have to pay given the limit – not the debt but the limit that you have – if that was completely full.
Home loan shopping
This refers to when you go to one bank and ask if you would be approved for a loan and then go loan shopping at several other banks.
Every bank checks your credit score and credit history. They put a mark on your credit history to note that they have checked it.
Doing this many times means that each subsequent bank will see these different checks on your credit history. And a red flag will automatically be set off their system. You may not even have anything bad on your credit history. But these many credit checks against your name could still cause issues.
So when you go into the bank to see if you would be approved, make sure that they don’t check your credit score or put a mark on your credit history.
Lack of savings
A lot of investment loans require that you show your proven savings. This is mostly the case if you have less than a 20% deposit.
You may find trouble securing a property loan if you’ve gotten your money from somewhere else and you haven’t actually saved it yourself.
Having savings or having a 20% deposit will help you to overcome these issues. But if you don’t have savings then it’s going to be much more difficult for you.
This is when you have defaulted on something like your credit card or phone bill or internet bill. These defaults show up on your credit score and your credit history and show that you have not paid your bill.
So if you have these on your credit history, find out if you can pay them off and get them removed so you can overcome that.
Living above your means
Often banks will ask you for financial statements or they’ll ask you how much money you spend each month. If you are living above your means – spending everything that you earn plus a bit more – then the banks aren’t going to look too positively on you.
The banks want to make that you can afford to live your life and still afford to pay for this property.
So living above your means is not going to look good to a lender. But living well below your means shows that you have extra money to spend on a mortgage and they are more likely to lend to you.
So there you have seven things that may be stopping you getting a property loan.