Are you nervous about the mortgage application process? You’re not alone. Getting denied a mortgage is a top homebuyer fear that prevents many people from even talking to a mortgage professional!
You might find it helpful to understand why a lender would deface your mortgage application with the dreaded “Denied!” stamp. Knowing this information will allow you to troubleshoot any application downfalls before you fall in love with a home! Join us while we take an honest look at the most common factors that derail mortgage applications.
Credit Conundrums
If you know anything about the mortgage process, you know that credit is critical. Here are a few credit-related issues that lenders might view in a negative light:
- Low credit scores
Even though mortgage programs are available to people with sub-par credit scores, lower limits still exist. In addition, the lender has the right to impose minimum thresholds that fall above basic program requirements. - Lack of credit history
It might seem unfair to punish borrowers who don’t make a habit of using credit, but if you don’t have a credit history for lenders to view, they don’t know if you’ll effectively juggle this new financial responsibility. - Recent credit activity
If you open a new credit card or borrow money for a large purchase, it temporarily lowers your credit score. We advise our clients to avoid these activities during the mortgage application process.
Income Issues
If you can’t prove on paper that you make enough money to get a mortgage, the lender will deny your application. Here’s what they look at:
- Debt-to-income ratio (DTI): If you’re not a math person, don’t worry. All you need to know is that the lender will take all your debts and eligible income, plug it into a standard formula, and arrive at a DTI. The lower, the better!
- Length of time with your current employer: Have you only been at your job for a few months? Lenders like longevity, so this might pose a problem for some.
- Income fluctuations: Did you recently receive a raise? Don’t expect the lender to look at that figure to determine your mortgage eligibility. Many lenders want proof that this is a permanent salary rather than a temporary wage increase.
Contact Us Today!
If the fear of being denied a mortgage is preventing you from reaching your goals, contact MortgageDepot today to find a loan program that meets your needs!
Connect with one of our loan consultants for more information.
