Mortgages are an essential financial tool when it comes to buying a house. They allow people to get the money to make the purchase. But mortgage companies do not always say yes. If you are one of those unlucky to have their application rejected, you might be wondering the reason for the refusal. Here are some of the common reasons why you end up with a rejection of your mortgage application.
Money Troubles
The most common reason for a failed mortgage application is that you are experiencing some financial issues. There are several financial red flags that a mortgage lender would look for. For one, you have a bad credit history. Credit histories are your history of payment for past debts. They can range from credit card debts to other loans that you took out. If you have not been keeping up with your payments, then lenders consider you a risk. They will only lend to people who can pay, and bad credit history is not a good sign.
Another major red flag against you is when you have multiple loans. If you are already under other debts, lenders will think you won’t be able to fulfill all your obligations with your earnings. It also doesn’t help if your income is low. The combination of low income and high debt means that the lender won’t risk that you can’t pay them back.
A significant financial issue that you have to worry about is whether you have the money to pay for the down payment and the fees. When your loan gets pre-approved, the only thing it is waiting for is your down payment. But if you cannot pay, then you will likely lose that pre-approval. Have the funds ready beforehand so that you only have to give it to them.
Application Mistakes or Dishonesty
A loan officer will look at your application, and they will check everything. If you made a mistake when applying or left something out from it, the officer will find out. If this does happen, it lowers the chance of acceptance. If you want a guaranteed approval, you need to be as honest and correct as possible. Don’t hurry when you fill up your application. It would be best if you sat down and fully answer the form to the best of your ability. You should include any information they request so that you leave a good impression.
Another problem is that you don’t complete the form correctly. Some mortgage applications get a rejection because they are missing info. Before you submit your form, it is a good idea to review the entire thing so that you didn’t miss any questions or blanks.
Low Property Appraisal
Another reason for your mortgage rejection might be the property itself. A property appraisal is part of the service, and that can cause problems for you. If the appraiser sets the value of the land at much lower than the purchase price. The loan-to-value ratio then goes way up. If the ratio is too high, then the lender won’t release the funds. Your only hope is to get a reappraisal so that the lender could reconsider your application.
Bad Employment History
If you are self-employed, there is a good chance you won’t get your loan. Being self-employed does not increase the lender’s confidence in you. Lenders want people with long employment histories and dependable jobs. If you leave jobs too quickly, then there is a good chance you get a rejection. Stay with a job for a few years before the loan so that the bank will look favorably on you.
Suspicious Money Movements
It is an unfortunate truth that real estate is the perfect way to launder some money from illegal activities. Many organized crime organizations give subordinates money to spend them so that they end up clean. One way they spend these large amounts of money is to use it to buy real estate.
This fact can look bad for you. If your parents suddenly give you money without any paper trail, it looks like gangsters gave you the money. Because of strict organized crime laws, the lender won’t be able to approve your mortgage.
To stop this from happening, you will want a solid paper trail for the source of your funds. If you received money from someone, have them write a written letter or an explanation for the money they gave you. This might not even be enough. Some lenders might evaluate your money sources before they make an approval.
Getting approval for your mortgage is a significant step towards getting a new home. Knowing the reason for your rejection will allow you to fix the issue. This might mean another loan application for you in the future.
