Your Mortgage Was Declined – Why?
Gaining a mortgage is not always a sure thing that will simply happen when you decide to apply.
The fact of the matter is that in 2015, 12 percent of applications submitted were in fact denied.
Take a look below at six possible reasons that apply to the question Your Mortgage Was Declined – Why?
1. You possess a credit score that is considered too low.
Your credit score is not affected by what is known as a “soft inquiry” which is basically your pulling your own credit score. In truth, it is considered a good practice to check your score fairly regularly. The law entitles you every 12 months to get a report from the three reporting bureaus that is free of charge. You should also know and keep in mind that if to approve a new account a lender pulls your score, that is considered to be a “hard inquiry”. This process is one that you typically will have to authorize. Paying your debts on time when they are due is the most effective positive influence on your score.
2. The debt you have is too much.
Your debt payment total each month should be no more than 35% of your monthly income and this figure should include your current mortgage payment if you have one. The simple fact is that it is so important you come up with a good plan for lowering your overall debt. And you should keep in mind that your available credit will be reduced when you close a credit account. In addition, you will also be raising your debt to credit score and if you are still carrying balances on other cards, you will be lowering your overall score.
3. Your home appraisal value and your loan amount do not match.
Options available to you include a different lender or a second appraisal. A home that you purchase should not be costing you any more than 2.5 times your regular household income and to avoid having to also pay mortgage insurance, your mortgage shouldn’t be any more than 80% of the value of your home. You should give serious thought to including a contingency clause in your purchase agreement that permits you, should your loan fall through, to back out of the deal. You also want to include in the clause that option of backing out should you lose your job or if the house does not appraise at its sale price.
4. You have tried to gain too many credit cards.
Your credit score may be influenced if you submit an application for a mortgage within three to six months of your applying for some other type of credit. Be alert to your personal situation before going out and applying for more credit accounts. Points can and will come off your score if there are too many credit inquiries or you seek to open too many accounts quickly. This is particularly true for someone with a short credit history.
5. You have big income shifts or a spotty employment history.
Positive consistency is truly so important. So that they can verify stable employment and income, lenders will usually seek at least two years of tax returns. You should meet with a mortgage broker prior to starting your home search so that you know just how much you can borrow. And if you have a pre-qualification letter in hand it will ease the concerns of all involved in the process.
6. A down payment is something you do not have.
You can expect approval snags without 3 to 20 percent of the purchase price on hand. The down payment amount you will require will vary depending on the location of the home, its size and precisely the type of mortgage you are seeking to get. It is so important you discuss all your possible options with the lender.
The best option for you is to try and get pre-qualified before you get started in the search for your home.
For more information about pre-qualification or raising your credit score, contact us at info@onestophomebuyersLLC.com
Reference: State Farm – Simple Insights