Everyone wants to get approved for a home loan when they first apply and there's nothing wrong with that. But the question is: How do you get there? How-to articles are great, but they don't always inform you about potential missteps in the application process. Here are the top five reasons mortgage lenders deny applications and how you can avoid making them. Bad Credit |
It shouldn't be a real surprise that mortgage lenders are looking for a history of good credit in a home loan applicant. As with any large purchase, your credit score will directly affect the approval and interest rates if you're approved. While frustrating to some, this process ensures banks do not approve risky financial transactions. Would you lend money to someone who has a known history of not returning borrowed money? If you did, you would want to take additional measures to justify taking the high risk. So, if you're interested in taking out a home loan, now or 20 years from now, start cleaning up your credit history. Make payments on time and improve your credit.
Debt To Asset Ratio
Just as much as mortgage lenders want you to have a good history of repaying debts, they also don't want you to carry various debts. A high debt to asset ratio indicates a lot of outstanding debts. Carrying too much debt signifies the potential for you to overextend yourself financially, which could ultimately lead you to default on your loans. If you default, then they don't get their money back. So, in order to avoid a denial based on a having too many outstanding debts, simply pay off your debts before applying for a home loan. Or at the very least, significantly decrease them. This will decrease your chances of being denied.
Income Instability Aside from the applicant's credit, the biggest potential indicator of the ability to repay a home loan is employment status. Specifically, mortgage lenders are looking for income stability. If an applicant has just started a new job within the last six months or has a history of changing jobs frequently, they may present a high risk for repayment and be denied. Self-employed individuals, unfortunately, fall into this category, but fear not, by simply providing proof of profitability you'll be able to turn things around. For all others, in order to avoid this situation, be sure to find employment that you can stick with for a while. This will not only help you with any debts you are carrying, but also help increase your chances of a home loan approval. Banks and mortgage lenders are strict about the terms and conditions of their money. A good credit score, debt to asset ratio, and income stability can help you quickly get approved for a home loan. With this information in mind, start planning now!
When considering mortgage lenders, Manson residents visit Manson State Bank. Learn more at https://www.masonstate.com/Personal-Banking/Mortgages.
Related Articles -
mortgage, lenders, mason, mi,