Whether it’s unrequited love, or an unsuccessful home loan application, getting your heart broken is never easy. Here are five common reasons home loan applications are rejected.

Due to the banking royal commission, lenders are cracking down on home loan applications.

Applications that would have been approved in a just few days last year are now being put under the microscope for much longer periods.

To help you in your quest to secure an approval, here are five common reasons a lender may reject your loan application.

1. No proof of genuine savings

Lenders use the term ‘genuine savings’ to describe funds you’ve saved over a period of time.

Basically, if you can’t prove to them that you can knuckle down and save for a home loan, they’re going to baulk when it comes to believing that you can pay one off.

Here are seven ways to prove ‘genuine savings’.

– Regular deposits into a savings account over 6 months.

– Term deposit savings accounts held for at least 3 months.

– Shares or managed funds held for at least 3 months.

– Rental history for the past 6 months.

– Salary sacrificing through the First Home Super Saver scheme.

– Additional repayments into a car loan or personal loan.

– Deposit paid to a real estate agent, builder or developer that was originally in your savings account prior to being paid (ie. not borrowed from somewhere else).

2. You spend like a drunken sailor

Lenders not only want to see you save money. They also want you to demonstrate that you can exercise discipline when it comes to your spending habits.

Therefore lenders will trawl through your spending accounts hunting for any big-ticket items that are out of the ordinary.

This might include a $400 ATM withdrawal at a casino, or a $100 purchase at a baby store if your application says you don’t have children.

3. Your credit history ain’t so hot

Since Comprehensive Credit Reporting was introduced in July, lenders have been sharing a lot more of your credit history.

You can get a free credit report once a year from one of three national credit reporting bodies, which are listed on this government website.

If you find errors in your report, you can get them corrected. You can also take steps to improve a ‘poor’ rating by clocking up a period of consistency and reliability.

4. You don’t have a big enough deposit

Lenders like to see that you’ve saved a deposit of at least 10% to 20% before applying for a home loan.

But all too often people forget to factor in additional funds for other expenses such as stamp duty, lender’s mortgage insurance and removalist costs.

That means, for example, if you have saved $70,000 for a $700,000 loan, you might want to keep saving for a little while longer before you apply for a loan to factor in those other expenses.

5. Your employment situation

Even if you tick all of the boxes above, lenders may also reject your loan application if you haven’t been in your job long enough. And if you’re unemployed, they can’t approve it full stop.

Those who are self-employed are also running into headwinds. Lenders are becoming increasingly hesitant to approve loans unless a steady and reliable income stream can be proven. That said, there are lenders who are more flexible when it comes to self-employed workers, and we can help guide you towards them.

How we can help

We help people who are seeking a home loan overcome all of the above hurdles on a daily basis.

So if you or someone you know has recently had a home loan rejected, or you simply want to nail it the first time, get in touch.

We’d love to help you navigate the tighter lending standards to make your dream of home ownership a reality.

Information is power. Knowing the property valuation can help you secure a great price during negotiations.

Whether you’re a buyer or a seller, having an accurate property valuation conducted can give you the confidence you need to close the deal in your favour.

And it doesn’t matter if you’ve had one conducted recently. The housing market is constantly shifting.

A house worth $600,000 a year ago could be worth much more – or even less – today.

So it’s vital to always obtain reliable, up-to-date advice on the value of a home when buying or selling.

Who conducts a property valuation?

Property sellers can approach either real estate agents or private valuers for a valuation.

While private valuers are not used by banks when lending decisions are made, they are useful for a guide to the estimated market value.

In fact, “bank valuations” are altogether another thing. They’re conducted by a lender to determine their risks when you apply for a home loan. And they’ll usually be more conservative than the market valuation.

What exactly is meant by “market value”?

The market value of a property reflects the price that a willing buyer and willing seller negotiate before a transaction takes place.

It is not the current listing price of the property or the amount of money that was last offered for the property.

How property is valued

A property valuer takes a number of different things into account before coming up with a figure.

Typically, they look at the number and type of rooms, the size of the property, location, and areas for improvement.

They may also look into whether the building has a sound structure, the quality of the property’s interior design and fittings, ease of access, and planning restrictions.

Outside the property, they will look into any local council issues and compare recent sales figures in the area to understand how in-demand the property may be.

Factors that influence value

Many of the factors that decrease a property’s value are beyond the control of homeowners.

The popularity of a property’s location and surrounds will have a huge impact on its price. For example, a new whizz bang unit block may go up next door making yours look outdated, or a new high rise could block your ocean view.

Government legislation – such as changes to foreign ownership or Labor’s proposed changes to negative gearing and capital gains tax – can also impact the market.

There are, however, ways that sellers can increase the value of their home outside fluctuations in the market. We’ll take a look at a few below.

Kitchen and bathroom: These areas attract the most interest from potential home buyers. Consider allocating a chunk of your budget towards new sinks, countertops and cabinets.

Fresh paint job: Painting can make a property feel new. Neutral creams and whites suit most people’s preferences. Lighter shades also give the impression of spacious rooms.

Get trimming: If your property looks gloomy, try trimming overgrown bushes, mowing the yard, and growing flowers.

Improve energy efficiency: Buyers may dig deeper into their pockets for a home that helps them save on energy costs. Install appliances with positive energy conservation ratings. Also, replace old windows with ones that have a durable sealing.

And a quick warning to the buyers out there. Make sure you don’t allow yourself to get “wowed” by cosmetic upgrades. Remember that there are other important factors you’ll want to consider when you evaluate a property too.

Want to conduct a property valuation?

If you’d like help finding out exactly how much a property is worth, then give us a call.

We’d be more than happy to put you in touch with a reliable, independent valuer who will help give you an insight into the market value of the property you’re looking to buy or sell.