Although lenders are generally more eager now than in past years to approve mortgage loans, there are some instances where you may be denied the loan needed to purchase a home.
Should you be preparing to apply for a home loan, here are some of the most common reasons why you may be turned down.
If you have had past credit problems, your poor credit history may be the reason your loan application was denied. Since a lender wants to make sure you are not a high-risk applicant, any problems with foreclosures, bankruptcies, or credit cards could be reason enough to deny your claim. Generally, if your FICO score is under 620, your loan will be denied.
Even if you think you have enough money to make a monthly mortgage payment, your lender may not think so, especially if you are unable to provide sufficient documentation regarding your income to debt ratio.
If you put down a minimal down payment on your new home, the lender will view you as a high-risk applicant, and thus may deny your loan. If possible, try to put down as much as 25% of the home's price as a down payment, since this will almost guarantee approval.
If your new home is appraised at an amount that is far less than the amount of the mortgage loan, your lender may deny your application. While you can get a second appraisal, your best option is to shop around for other lenders.
Should you possess a limited employment history or have one where you have changed jobs frequently, this can be used against you by your lender to deny the home loan.
Poor Credit History
If you have had past credit problems, your poor credit history may be the reason your loan application was denied. Since a lender wants to make sure you are not a high-risk applicant, any problems with foreclosures, bankruptcies, or credit cards could be reason enough to deny your claim. Generally, if your FICO score is under 620, your loan will be denied.
Income/Asset Documentation
Even if you think you have enough money to make a monthly mortgage payment, your lender may not think so, especially if you are unable to provide sufficient documentation regarding your income to debt ratio.
Should questions arise about this or other related areas, private equity representation may be what's needed to let everyone make a well-informed lending decision.
Very Small Down Payment
If you put down a minimal down payment on your new home, the lender will view you as a high-risk applicant, and thus may deny your loan. If possible, try to put down as much as 25% of the home's price as a down payment, since this will almost guarantee approval.
Issues with the Property
If your new home is appraised at an amount that is far less than the amount of the mortgage loan, your lender may deny your application. While you can get a second appraisal, your best option is to shop around for other lenders.
Limited Employment History
Should you possess a limited employment history or have one where you have changed jobs frequently, this can be used against you by your lender to deny the home loan.
In most cases, a lender will want you to have at least two years of consistent employment with your current employer prior to approving your loan.
If you have had your home loan application denied, don't give up. By seeking out other lenders and making improvements where you can, it is quite possible you may still get the loan needed to purchase your dream home.
If you have had your home loan application denied, don't give up. By seeking out other lenders and making improvements where you can, it is quite possible you may still get the loan needed to purchase your dream home.
