While it is rare, a home loan can still be declined even after unconditional approval. Understanding the reasons behind this and knowing what to do can help you navigate this challenging situation.
Can a Loan Be Declined After Unconditional Approval?
Yes, it can. Although extremely rare, a home loan can be denied after unconditional approval due to certain circumstances. The formal approval letter from your lender typically includes terms and conditions such as ‘subject to further bank requirements’ to enforce it.
Why Might a Lender Re-evaluate?
A lender might re-evaluate and ultimately retract an unconditional approval for several reasons. The primary one is significant changes in the borrower’s financial situation that can affect their ability to repay the loan.
“Lenders have an obligation to ensure the serviceability of loans. Therefore, if any circumstances come to hand that dramatically alter the borrower’s ability to service the loan before settlement, they must mitigate the risk by declining,” explained Rebecca Moroney, principal buyer’s agent and owner of Wayfinder Agency.
Regulatory Obligations
Under the National Consumer Credit Protection Act (NACCP Act), lenders in Australia are required to take reasonable steps (i.e. making inquiries and conducting thorough checks) to confirm that a borrower can meet the loan repayments without undue hardship.
What to Do If Your Loan Is Declined?
If your loan is declined after unconditional approval, it’s crucial to:
- Understand the Reason: Contact your lender to get a clear explanation.
- Review Your Financial Situation: Ensure your financial records and statements are up to date.
- Seek Professional Advice: Consult with a financial advisor or mortgage broker to explore alternative solutions.
Note: This content is a revised version from the original article published on Infochoice on 27/6/2024 .
