Reasons why your mortgage was rejected
Reasons why your mortgage was rejected According to a survey by the National Association of REALTORS, 30% of potential homebuyers who don’t currently own a home believe they would have trouble qualifying for a home loan.
A small fact in your financial history could prevent you from accessing a mortgage.
Common reasons for rejecting a mortgage
Your credit score is very low
Getting your own credit report, also known as a “soft inquiry,” won’t affect your credit score. In fact, checking your credit report regularly is a responsible financial practice.
In general, this procedure requires that you authorize it.
The most effective way to positively influence your credit score is to pay your debts on time.
You have too many debts.
The sum of your debt payments each month — including your current mortgage — should be less than 35 to 40 percent of your total monthly income.
The best thing you can do to reduce your debt is to make a plan to pay it off.
Remember, closing a credit account reduces your available credit, which can raise your debt-to-credit ratio, also known as your credit utilization ratio, and therefore lower your score, especially if you carry balances on other cards.
The amount of your loan and the appraised value of the home do not match.
In this case, your options are to get a second appraisal or a different lender.
Consider including in your purchase agreement a contingency clause that allows you to back out if you don’t receive your loan, if the home doesn’t come to its selling price, or if you lose your job.
You have applied for too many credit cards
Applying for a mortgage within six months of applying for any other type of credit can influence your credit score. Analyze your situation before opening a series of accounts in a row.
You have an inconsistent employment history or large changes in your income.
Before you begin your home search, meet with a lender or mortgage broker to determine how much money you can borrow. Having a prequalification letter in hand offers peace of mind for you, the seller, and the real estate agent.
You don’t have a down payment.
If you don’t have 3% to 20% of the purchase price saved, expect to run into obstacles to approval.
Some lenders may offer loan programs with low down payment options but may require mortgage insurance, increasing your total monthly obligation. Talk to your lender about your options.
What is your best option?