Finding solutions behind a declined loan application
My clients were a young couple in their early 30s who were planning for their first baby. They were living in Surfers Paradise in a two-bedroom unit. They wanted to upgrade to a house with a backyard ina family-friendly suburb. They found a property and made an offer, with 14 days to finance and 60 days to settlement. They went to their bank for the home loan and got conditional approval; however, the valuation came back $20,000 lower than the contract price.
They did not have extra funds to contribute, so it could not go ahead as the bank couldn’t order another valuation. Looking for options, my clients got recommended to another broker. That broker applied for their loan but got declined.
I met the couple through a mutual family friend at a dinner party. When the male client found out I was a broker, he told me about his situation and asked me questions. I told them to come see me the next day and I would try to help.
The clients were quite distressed as they’d already asked for an extension and had only three days left for finance.
My first step was to get a rundown of what happened with the bank and the previous broker, to understand the clients’ situation
My first step was to get a rundown of what happened with the bank and the previous broker, to understand the clients’ situation. I wanted to know the reasons they’d been declined so I could tailor a solution to them. I prompted my clients to obtain their credit report. The report showed that they had numerous credit enquiries. The male applicant said he’d applied for a car loan through a dealership, but they hadn’t gone ahead with it. Instead, they’d taken out a small personal loan and had applied for a couple of credit cards. All of this had negatively impacted their credit score,
After ascertaining the situation, I told the clients to be prepared to request another extension, and that I would do my best toget the loan over the line.
I found a lender who did not credit score applications. The interest rate was still very competitive compared to the big four banks, so it didn’t disadvantage the clients. I also ordered an upfront valuation for the property. This time it came back only $5,000 short of the contract of sale, as opposed to $20,000.
Before submitting the application, I contacted the lender BDM to stress the time constraint we were under, and also to run the scenario by him to ensure it would go through. We had to ask for an extension of four working days. With the help of the BDM and the assessor, we got full approval done on time and the client settled as per the contract. The clients were so thankful and relieved that they were able to get their dream house.
This experience was a learning curve for me. I was close to not offering my help to this couple when I was told that their own bank and another broker couldn’t help them. But due to our mutual friend, I decided to give it a go. As brokers, we need to take our time to learn about the clients and their situation. At times you may need to use a lender that’s not your favourite, but if you can help clients who are in a difficult situation get a loan, they will always be grateful.
Having a good relationship with the BDM was a great help in pushing the loan through, given the time constraint. They are there to help us and they will benefit us and our clients. I remember my mentor telling me: “Make your BDM your best friend”. I have always thought of that and have applied that in my day-to-day life.
I strongly believe self-reflection is another important thing for brokers to do. What worked? What didn’t? What will I do if a situation like this occurs again? These are the questions I ask myself with every deal. Even the best of the best have room for improvement, and I am just a rookie.