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Housing loan application rejected? Know why and what you can do to remedy it
As real estate loans extended by universal and commercial banks in the Philippines rose by 4.7 percent in the third quarter of 2016, or Php53.39 billion more than by September of last year, now is perhaps the easiest time to apply for a housing loan. Unfortunately, immediate approval is not always the case, as some applicants still do not meet the qualifications specified by a bank or their chosen lender. In this edition of Lamudi Q&A, we detail the steps a person can take in the event that their housing loan application gets rejected.
Q: What if My Housing Loan Application Gets Rejected?
A: Not qualifying for a loan does not necessarily mean you are not qualified for home ownership. Knowing what to do next after being rejected can still yield options that subsequently can help with the purchase of your desired living space.
1. Ask Your Lender Details Regarding the Reason for Rejection
The first thing to do upon being notified of your housing loan application’s rejection is to ask why. As banks are governed by law to abide by certain criteria when approving or rejecting loans, they are similarly obliged to provide details to borrowers as to why a loan was rejected. Your loan adviser will likely touch base with you regarding this since they will also likely offer possible loan alternatives.
2. Consider Purchasing a More Affordable Property
One of the aforementioned alternatives may be to consider buying a property priced a little less than the one you were originally applying for. Some borrowers are not necessarily rejected for a loan together, but are at times denied for the amount they are applying for. This commonly happens when the principal amount of the loan is considered sizable when compared to the borrower’s savings and household income.
By considering property for sale that is a little more affordable, and subsequently applying for a housing loan with a lower principal amount, your credit and other finances may be substantial enough to result in its approval.
3. Or Purchase an Outright Different Property
Another possible reason for the rejection of your loan application is not with regard to the price of the home, but rather the property itself. Most banks tend to have rigid standards when evaluating the properties their housing loans will be used for, particularly because the land title to these properties serve as collateral during the life of the loan.
While banks ideally do not want their borrowers’ loans entering default, they very much consider this possibility, and prefer to avoid receiving the rights to a property that is problematic to sell, which they would have to do in the event that a borrower is unable to make monthly housing loan payments.
4. Explore Other Loan Options
If the reason for the rejection of your application is not your property of choice, then in all likelihood it is the state of your finances. It is either your income is not yet established enough to be considered sufficient for covering monthly mortgage payments, or that your credit history is not very favorable, perhaps because of overdue utility bills, an existing loan, credit card debts, and others.
In these instances, you should ask your loan advisor if there are other housing loan programs that their institution offers that may be better suited to your needs and present finances. These would likely be offered to you when your initial application is rejected anyway, as most banks tend accommodate borrower needs whenever they can to best retain the latter’s business.
5. Try Applying for a Housing Loan Elsewhere
Even if you exhaust all your loan options with a specific bank, it does not prevent you from exploring other lenders. Granted, most private financial institutions more or less follow similar qualifications and requirements, but some have a greater variety of programs, while others are also a little less stringent in terms of approving applications.
Apart from banks and other private lenders, you can also opt to explore options with the Home Development Mutual Fund, or the Pag-IBIG Fund. If you have been a remitting member of Pag-IBIG for at least 24 consecutive months, you are eligible to apply for a Pag-IBIG housing loan. In the event that you do not qualify, you can also look at mortgage loans from cooperatives, or apply for real estate developer’s in-house financing if you happen to be buying a property from one of them.
6. Consider borrowing with a co-signer or a co-borrower
If for some reason you do not qualify for any other loan program with any other lender on your own, another option to possibly get approved is to submit a new application with a co-borrower. The person you sign the loan with, for all intents and purposes, should have a credit history that is of the best possible standing for a greater chance at approval.
This is an option that should be considered a last resort as you would not want to place any loan liabilities on anyone else but yourself, but in case you do need to explore it, best share the responsibility with someone who you will share the home with. Your spouse is what most comes to mind, but could also be a parent, a sibling, your in-laws, or several others. It would be best to check with your loan provider if they allow co-borrowers and understand whom they deem as qualified.
Main image via Shutterstock
