Reasons Banks Deny Mortgage Loans
So, you’ve thought of whether leasing or buying your new home is the appropriate decision for you. If you make a decision to purchase, you’ll likely need to prepare for funding your acquisition with home loan payments…Your new mortgage. Below’s where complicating factors to your dream of home ownership come into play and can become a tad bit tricky.
While getting a hang on the costs involved with house purchasing can help you identify if you prepare and just what you could afford, you also have to show to loan providers that you could and will certainly make your payments. To comprehend why some applicants obtain approval for their dream while others are turned away, take a look at some of the reasons your home loan application may not achieve success you had hoped it would.
Bad Credit
If you have a low credit score, lenders likely will be reluctant. If a lending company is willing to work with you despite a rough credit history, it may bump up the interest rate or offer unfavorable terms. But even if you have experienced bankruptcy or home foreclosure in the past, bad credit is not a permanent condition. It’s a good idea to check your free annual credit reports and make sure they don’t have errors. Then, work toward paying down credit balances and make payments on time so your score can rebound. You can also check your credit scores for free every month on Credit.com.
Unrealistic Expectations
Having an idea about what size mortgage you will qualify for is important. Since affordability is based on various factors, it’s important to understand what you can really afford going into the process. (To understand how much you might qualify to borrow and how much payments would be, try using a free online mortgage calculator.)
Avoid Mortgage Denial With Preparation
Existing Debt
Applicants with too much debt often get rejected for mortgages. All lenders have a debt-to-income ratio they work with and if your ratio falls outside the desired proportion, they will not approve you. If you have a lot of debt, it may be a good idea to focus on paying down your debt and/or increasing your income before applying for a mortgage.
Employment Issues
Affordability criteria is taken very seriously. You must have enough income, but also the right type of income. Lenders tend to prefer employment that provides a regular and consistent income. If you are self-employed or work on commission, you may need to prove that you have been profitable for at least two years. If your income is too irregular or there are significant gaps in your employment history, your application might be rejected.
Before you begin applying for home mortgages, see to it these variables are in order to speed up the process as well as increase your possibilities for achieving homeownership quickly. Consider researching by examining leading real estate publications and prepare to present your best stance for lenders.
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