This post is written on the back of something that happened in January but to be honest it happens maybe 3-4 times a year.
Can you imagine as an applicant you submit your application and the underwriter declines your application? What do you do?
Why was your application declined?
This is an important question. The reason it was declined can vary. We sometimes see:
Underwriters discretion – this is a tough one to take most times as everything fits but the underwriter just does not like the application as a whole.
Valuation problems – OK so this one is not the underwriter but it is still a reason for your application to decline. The principle could be the same though, the property might be fine. Its just the valuer/surveyor does not like it.
Mistake or misunderstanding – This could be your mistake as the applicant, a brokers mistake or the underwriters mistakes.
Understanding why the application was declined is important, but not always possible. If we can find out why the application was declined, there is a chance we can fix it.
What can be done?
We might be able to re-jig the application. It might be that the underwriter needs a larger deposit to get them more comfortable with the situation or a change to the term to make it more affordable or to finish before a certain age due to a risky occupation maybe.
It might be a case of trying a different lender. Sometimes we get declines due to unknowns or underwriters discretion. This can mean we go to Plan B and a second lender due to new information.
There are lots of things that can be done in theory, but they will vary from case to case.
Our case
In the example which got me writing this post, it was a discussion with the underwriter. The application had been to the lender previously with another broker and had been declined. When I did the research we only had 2 options for the client due to their circumstances. The difference in the rate available were almost double so it made sense to go with the cheapest even if it had been declined.
I did what I considered to be a thorough job, everything fit it was obviously not the best case due to the limited options but it was well within what I thought they would accept.
It passed its initial assessment, but the underwriter called to say they had declined the case due to adverse. I thought that was a bit unfair as the adverse was historic and the client had been through the mill with health so was easily explained and with nothing more recent I thought it was only right we fought the customers corner.
The underwriter took onboard the points I made and went off. When they came back they advised they were happy to agree the case subject to providing some additional documents which we collated and sent in.
Summary
What happens when the bank or underwriter says no? Do you fight your corner or do you accept it?
Dont get me wrong, there are applications where I know they are 50/50 and if the underwriter says its not for them I can completely understand why and although I will try to get it through I know its unlikely. In these scenarios I would have made the customer aware upfront that it is a possibility. I always try to put my “underwriters hat” on and think what would I do in their shoes.
With this case however, I did not expect there to be any problems. I thought it was worthwhile making a post about this. We never submit an application expecting it to be declined. But there are times we think it is a possibility. In those cases we only do it because the alternative is also risky or significantly more expensive and importantly, where the outcome of this application will not affect a future application.
On those cases we discuss whether you want to skip straight to the lender most likely to accept or to give the cheaper lender a try. But most times where we have time on our side, I think most people prefer to try for the cheaper deal.
If you are looking at multiple brokers (and why would you when you have found us! only joking), are they used to complex applications? Will they fight your corner if your application is declined? Do they even know you can fight a decline?
Its worth thinking about.