Do You Know The 6 Reasons Why Mortgage Applications Are Rejected?
Applying for a mortgage can be a stressful time, especially if you don’t know what can mess up your application. Half of refinances and 30% of purchases are rejected, according to the Mortgage Bankers Association and the Federal Financial Institutions Examination Council. Those are some scary stats. But you can avoid application rejection by avoiding these six mortgage application issues.
The quickest way to get your mortgage rejected is to have an income that’s too low for the mortgage amount you’re seeking. This is why lenders and realtors stress the importance of getting preapproved, so you know how much you can afford before even starting the application process. In addition, if your spouse is planning to contribute, but has credit issues, they’re contribution can’t be considered by the lender.
Muddled Money Matters
If your mortgage in addition to your usual monthly payments (car, credit cards, student loans, etc.) is more than 45% of your total income, then you will run into problems qualifying for a mortgage. Click here if you want a more detailed description how to prevent this. Also, if you’re planning on relying on bonuses, overtime or rental income you may also see trouble when applying.
The lowest most lenders allow your credit score to be is 660-620, depending on your lender. Check out your credit (it’s free!) and improve it if necessary before applying for a loan. Keep in mind that if you do have ok credit, but have late mortgage payments, a short sale, foreclosure or declared bankruptcy in the last two years, it’ll be almost impossible to qualify.
Property Didn’t Appraise
After the housing market crash, appraisal guidelines have tightened even more than mortgage guidelines. Appraisers tend to be very conservative when appraising homes in response, resulting in a lot of houses being appraised lower than the sale price negotiated.
Home sale transactions can fall apart due to the property’s conditions. Appraisers will mark cracked or broken windows, missing kitchen appliances, electrical problems and wood rot. Some lenders don’t extend financing to allow time for the seller to fix these.
Technical Difficulties with Application
This can be the easiest thing to avoid. If you don’t provide your lender with all the necessary documents they request or the information you do provide can’t be verified, than your mortgage application is doomed.
Keep these six mortgage mistakes in mind as you plan on applying for a loan. Make sure you stay connected with your mortgage professional throughout the entire process to avoid any unexpected disasters. By knowing why a mortgage application can be denied can be the key to helping you get your application approved!