Imagine you’re buying your dream home or applying for a loan to fund your plans, and something unexpected happens. For example, a job change, a drop in your credit score, or a surprise financial problem. What should you do in this situation?
In this blog, we’ll look at common changes that can affect your loan application and how to handle them.
Changes that may affect your loan or mortgage application
When you apply for a loan or mortgage, lenders ask about your personal and financial situation. But life can change at any time during the process. Here are some changes that might impact your application:
Income or job changes
If your job situation changes, like starting a new job, earning less, or getting a different job title, you need to inform your lender. These changes might affect your lender’s offer, and your documents may need to be updated.
Changes in your financial health
If you miss payments, take on new debt, or apply for new loans, it can affect your loan approval and affordability. Be sure to inform your lender about any such changes.
To avoid problems, try not to apply for credit or make big purchases while your application is being processed.
Personal changes in relationships and dependents
If you get married, divorced, or have new dependents, let your lender know. They may need to check if you still meet their affordability requirements.
Property valuation
If you’re buying a house or securing a loan against your property and the valuation comes in lower than expected, it could mean you won’t be able to borrow as much as planned. Be honest about this with your lender to avoid issues later on.
Illness and inability to work
If your health suddenly worsens and you’re unable to work or have to reduce your hours, let your lender know right away. While this may affect their loan or mortgage offer, they may be able to provide a solution that better fits your new situation.
How can a change in circumstances impact your loan or mortgage application
If your circumstances change during your loan or mortgage application, your lender may withdraw their offer, change the terms, or even be unable to help if you no longer meet their criteria. For example, if your situation makes you a higher risk, the lender might offer you a higher interest rate. On the other hand, if your circumstances improve, such as a higher income or better credit score, you could qualify for more favourable terms.
What to do if your circumstances change
If your situation changes during your loan or mortgage application, being honest and upfront is crucial. Here’s how to handle it:
Contact your lender
Let your lender know right away about any personal or financial changes. This helps them reassess your affordability and make decisions based on your updated situation.
Reaching out early gives your lender the chance to support you and work on a solution. Ignoring changes or failing to inform them could lead to bigger problems later.
Try to find a solution
If your situation changes, talk to your lender or broker for advice. For example, if money is tight, you might be able to negotiate lower monthly payments by extending the loan term.
If your application is withdrawn because of these changes, your broker may recommend other options, like working with specialist lenders.
Talk to your broker (if you are using one)
If you're facing challenges, being open with your broker can help. They are there to guide you through the application process and make it easier. Brokers know the lending market well and may be able to help you find other options if needed.
Summary
Unexpected changes can happen at any time, even during your loan or mortgage application. It's important to inform your lender and broker about any changes that could affect your application. While this may impact your approval, they may be able to suggest other solutions.
