If you recently applied for a mortgage loan and it was turned down, it can be difficult to pinpoint why and the lender may not disclose all of the reasons. There could be a single reason why you weren’t approved, or it can be due to multiple reasons. The following are some of the more common reasons that applicants aren’t approved for home loans, and if any of this sounds familiar, you can work on the areas that need improvement before applying again.
You needed a bigger down payment
Unless you applied for a special mortgage loan that has exceptions to the traditional down payment amount, such as a VA loan or FHA loan, you may have been denied because you didn’t have enough for your down payment. Traditional mortgage loans require that applicants have at least 10 percent down upfront, and in some cases, you may need to have up to 20 percent. Whether you didn’t receive the amount of financing you needed, or you were denied completely, this could be one potential reason.
Your credit isn’t good
Credit is important when you’re applying for any type of loan, but when it comes to mortgage loans, lenders tend to set the bar high. You may not need to have terrific credit, especially if you meet salary requirements and/or you have a large down payment. But a bad credit score can stand in your way of obtaining a mortgage, especially if you filed for bankruptcy or if you previously went through a foreclosure. Your best bet is to wait until your credit situation improves until you apply for a mortgage loan again.
You have too much debt
It’s possible to have good credit, yet still be in a lot of debt. Some lenders may see substantial amounts of debt as a sign of financial distress, even if it’s not the case. Before applying for a mortgage loan again, make sure that your debts are mostly or completely paid off first.
Your income is too low
You must meet certain income requirements in order to qualify for a mortgage loan, which will also vary depending on how much financing you need. If you fall short of this requirement, you may not get approved for a mortgage loan. If you save up more for a larger down payment and/or wait until you’re at a higher paying job, you may have a better chance at getting approved.
You have inconsistent employment
Lenders like to see employment stability, and without it, you may not get approved for your mortgage loan. If you’ve gone through a lot of job changes recently and you weren’t working at your current company for long when you applied for your mortgage loan, this could be a reason that you weren’t approved. Wait until you’re at your current job for at least six months before applying again, although the longer you can wait, the better your chances will be. Ideally, you’ll want to be with the same company for at least two years.
Getting approved for a mortgage loan can be difficult sometimes, especially with poor credit or without the money required for a down payment. If you need help paying off debt and saving up for a down payment, Peachtree Financial Solutions may be able to help. As an annuitant, you may have the option of selling some or all of your future annuity payments and receiving your cash sooner. You can then use that lump sum towards your home purchase. Contact Peachtree Financial Solutions today to learn more about selling future payments for a lump sum payment.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.