It’s frustrating when you get rejected for a mortgage when you are ready to buy a new home. There are common mortgage denial hurdles borrowers face when they are turned down for a mortgage. Each lender is a bit different, but there are certain categories that lenders consider when deciding whether to approve your for a mortgage or not.
If you are turned down for a mortgage, learn what your mortgage denial reasons are. With the experience you have gained, it is possible that you can clean up your credit quickly in order to be successful the next time you apply for a mortgage. Find out the specifics of your denial and work to change your credit profile so that you can purchase the home you want.
1) There’s a History of Late Payments
Late payments show your lender that you are not consistent in paying back your bills. You can see your late payment history in your credit report. Look at your percentage of late payments to see where you can improve. If you have unresolved debt, this can accrue as a late payment every month.
2) Your Debt to Income Ratio is Too High
Your lender will look at how much debt you have and what your current income is. Most lenders will approve a mortgage if your debt-to-income ratio is around 30 percent. If you owe too much debt, lenders are hesitant to lend to you because it is more difficult for you to pay back your loan.
3) An Inconsistent Employment Record
Lenders want to know that you are responsible, and this shows in your employment record. If you are always changing jobs, or you have a poor work history, your ability to pay back a mortgage is in question. If your employment record is inconsistent, stay at your current job. Wait six months and apply again.
4) You Can’t Pay Closing Costs
You can be denied for a mortgage if you don’t have enough money saved to close on the deal. This is an issue you might be able to work out with the seller if they are eager to sell. There are times when a seller will pay for the closing costs in order for the deal to go through.
5) The Home Appraisal Doesn’t Match Up
When you get a home appraised in order to get a mortgage, the appraisal has to match the amount you are trying to borrow. This means you can’t offer way over the asking price for a house and expect to get a mortgage for the entire amount. If the appraisal is much lower than what you offered, you may be able to re-negotiate with the seller.
6) Your Bank Account Has Some Red Flags
Mortgage lenders take a look at your bank statements and will deny your mortgage if there are too many red flags. Bounced checks for insufficient funds are a red flag, as are big deposits of cash with no clear source.
You Have Minimal or Bad Credit
While you might be able to get a mortgage with a lower credit score, it’s important to raise your score before applying. If you have no credit history, you can be denied a mortgage.
How to Bounce Back From a Mortgage Denial
Check with your lender about how much time you should wait before applying again. Find out exactly why you were denied a mortgage, and work to fix the issues. Make a plan and stick to it. You will eventually get a mortgage when you put in the work.
Don’t lose hope when you have been turned down by a mortgage lender. Make the changes that you need to make, and you will get approved. Contact Mid America Mortgage today to learn more about your mortgage options.