Luminor Rejects About 10% of Home-Loan Applications at Initial Review

Submitting a home-loan application may be quick and easy, but banks examine a customer’s finances and payment record before approving long-term borrowing. Luminor says about 10% of applications are rejected during the initial assessment, with negative credit history among the most common reasons.

Margit Volt, Luminor’s head of home-loan development, said a credit history shows how a person has handled financial obligations. Banks consider existing home and consumer loans, leases, credit cards, credit limits, debts and payment defaults.

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A single late payment does not automatically mean that it is impossible to obtain a home loan.

A single late payment does not automatically rule out a mortgage, Volt said. The bank looks at the overall pattern, including how often and how long payments were late. Repeated or prolonged delays may suggest that a borrower could struggle with new long-term obligations.

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A home loan is usually a very long-term obligation, so the bank must assess not only whether a person can manage the loan payment today, but also whether their level of obligations will remain affordable over a longer period.

A negative credit history can lead to a smaller loan, a shorter repayment period or a higher interest rate. Luminor also assesses income, existing commitments, the size of the down payment and the property being purchased. Volt said monthly loan payments should generally remain at about 30% to 40% of net income, leaving a buffer for daily costs and unexpected expenses.

She advised prospective buyers to review their finances before finding a property and submitting an application. Existing obligations should be checked early, and any debts or extended payment delays should be addressed as soon as possible.

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If buying a home is planned in the coming years, it is worth reviewing existing obligations early and making sure there are no debts or prolonged payment delays.