A number of Lenders are declining home loan applications after initially issuing a pre-approval. This practice is placing home buyers into dangerous waters.
According to Justin Doobov, managing director of Intelligent Finance in Sydney, more and more lenders are ‘reneging’ on mortgage pre-approvals after the property is actually purchased. Intelligent Finance are finding that at least one client every week is experiencing a problem with their home loan pre-approval. The Mortgage Broker is then faced with frantically looking for a mortgage alternative for the prospective purchaser.
Many lenders are performing various checks on the home loan even after the approval has been issued. If anything is not quite right they simply decline.
This makes the mortgage pre-approvals pretty much useless.
Certainly a more consistent approach should be in place with the lenders and pre-approvals to provide a safety net for the purchaser. It should be expected that all employment and credit checks are carried out at the time of pre-approval and not after the customer makes a purchase.
The finance regulators should really have a closer look at lender behavior with pre-approvals.
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