For most homebuyers, there is no choice: They must obtain a mortgage in order to complete their purchase of a home. Even with lenders offering high-ratio mortgages, however, not everyone is approved for a mortgage when they first apply. This column examines some of the options available to homebuyers if the bank rejects their mortgage application.

Being declined by a bank does not mean an end to your dream of home ownership. All it means is that your application falls outside of the lender’s lending criteria. This could happen for a number of reasons. For example, if you are self-employed the bank may reject your loan. If you are a discharged bankrupt, or recently began a new job, your application may fall outside the lender’s approved criteria. Regardless of the reason, if your application to one of the big banks for a mortgage is denied, there may be other options available.

One of the options to consider using is the services of a mortgage broker. A mortgage broker will assess your needs and try to arrange a loan on your behalf. Mortgage brokers have extensive contacts and are well equipped to find a lender to finance your purchase. Brokers may use a bidding system, which provides access to secondary lenders, and perhaps even private lenders. The bid system involves the broker electronically submitting an application to a number of lenders at the same time. The lenders then have the opportunity to view the loan you want and bid on it. Participants in the bid system usually include the major banks as well as secondary lenders.

If the bid system is not successful, there is another solution. Mortgage brokers have access to what is commonly referred to as ‘private money”. These are funds of individuals who are looking for loans to place. If your broker places your loan in the private market, you will likely pay a rate of interest higher than that posted by the major banks. Additionally, if you use a mortgage broker to arrange your loan, you will also be responsible for paying the broker a fee for his or her services. The loan will cost you more money, but this may be your only option.

The bottom line is that if the bank rejects you, some other options are available.