Pre-Approved: Loan Declined

We wanted to build a house so we received our Pre-approval from ANZ and went ahead with the purchase. Our land settlement date had to be constantly push back due to the development being behind. Finally everything was finished and settlement on the land happened. Easy peezy no worries.
So now the house, we had everything sorted we had the final contract amount and our pool contract and some extras that were well in our borrowing compacity, got our valuation all perfect. Went to put everything and the loan was declined. My Score Card did not meet their criteria and they were unable to provide a reason why.
I have been in the same job for over 5 years. Never defaulted on a loan or any type of bill. I have been living at my parents until the loan was finalized to save money. I am also going in with my partner who already owns a property with ANZ bank as a investment property. My situation has not changed. The only thing that may have been different is I have a credit card that I purchased a holiday on but paid it off only a couple of weeks later.
They also said they wouldn't give us the full amount for the extras only 10% even though it is not written in their policies. We are going through a broker and she is dealing with people in India and you can see all the mistake they are making, they refused to use my partner OT and bonuses but changed their mind, they also revoked my score card as soon as we said we would use the other house a collateral. They then asked for a letter from his employer explaining the bonus structure, and they are now coming back to us for more. They then said if our builder included all our external quotes on their house quote they would accept it... whats the difference.
We are now stuck because if we go to another bank we will lose our mortgage insurance already paid on the land. It feels like they are purposely causing problems for us.

 

There is always a reason.

 

Score card declines usually have a reason associated with your credit history - e.g. payment arrears, overdrafts going beyond limits, etc.

Interestingly i've seen a recent case of a pre-approved loan in late 17 having scorecard issues in Jan by ANZ. This particular scenario had a range of late payments & arrears & overdrafts being overdue - so it wasn't particularly surprising the credit scoring system would decline a deal. The surprise was that it passed in the first place. Perhaps anecdotally there may be some tightening around the edges on ANZ's credit scoring system thats been implemented in 2018 (its computerised, so its hard to know exactly what is going on here).

 

One of the challenges with a land purchase and then later construction is the time involved. A pre-approval is only good for 90 days (sometimes less) before it needs to be reassessed. This is a risk with any time of house and land project, or an off the plan purchase and there's no real way to mitigate it.

There's any number of reasons why your loan might have been declined. Quite likely is a change in the lenders policy or risk appetite. That's been happening quite a bit lately and I've experienced it myself.

Last August a client had a rock solid pre-approval. They purchased only 3 weeks later, but in that time the lender had some significant policy changes. Their pre-approval was not honoured despite no changes to their financial position at all. In this case annual bonus' were part of the equation. It was declined on what I felt was a technicality rather than a genuine reason.

Relying on these is a risk and can be a major PITA. I suspect that a policy change to bonus income between the land and construction is the cause in this case. Needing LMI also means the bank isn't able to make exceptions to their policies.

The good news is there are lenders that are more generous than the ANZ. The LMI is a real pain. I doubt they'll refund any of it, but it wouldn't hurt to ask.

 

We were denied approval for our loan from CBA, even though they're familiar with our complicated structure and we have about 5 loans with them - we're high income/millions in redraw. The loan LVR was very low - we have over 2 million cash deposit.

Rules changed IN DECEMBER, apparently a few days after we submitted.

It was irritating that we had to go to RAMS but we are simply grateful to score approval from someone to enable us to purchase our home!! We are so grateful to our broker.

 

Whats confusing is they turned around and accepted his bonuses, after first denying them.
Even without the bonuses he could still borrow the amount we were asking for anyway on his taxable income.
I went online and checked my credit rating and it was in the Excellect section 839 or something. But they revoked when the other property was brought into it.. I'm confused how that would make a difference in my case.

 

@NeatZ exactly the same as what I've experienced. As a broker I get a bit nervous whenever an application is reliant on variable income. The problem is so many people receive it these days...

 

I don't know much about ANZ scorecards, but if it's like other scoring procedures from lenders I've worked for in the past - any changes in Equifax/Veda are very temperamental. Your original approval would have had two queries attached (ANZ plus LMIs). Then the Credit Card. Now, you are reapplying after 30 days from the original approval will need another credit check done, so that's 4 queries in relatively quick succession. (potentially 5 if they have already resubmitted to LMI), and additional if you applied for anything more than you didn't take up. Higher the LVR, amplifies the affect of these credit changes.

 

Would they have looked into why I would have had to do another credit check and that's why they revoked it? Obviously I would have no other choice but to do get another one done to go ahead with the next part of the build/loan. ANZ knew we would be putting a house on the block, they dont allow you to do land only loans.
So your saying now that if I go to another bank and do another credit check it will just be an automatic decline?

 

For next time, get the build contract before the land settles and do both together. Saves extra credit enquiries, a second set of drama with another approval and only one lmi charge (doing 2 lmi applications means the second refinances the first so you are paying lmi on lmi)...