Anyone who has bought a home will agree that the most challenging part of becoming a homeowner is getting your mortgage application approved. There is a series of processes that you need to undergo-from securing essential documents to passing the lender evaluation. All of these steps are not easy to accomplish. Every year, millions of individuals are applying for mortgages, but not everyone gets to complete the process.
While it is true that applying for a mortgage loan is not a walk in the park, getting your loan approved is not elusive either. There are good reasons your mortgage application can get rejected. You will need to review your application to increase the chances of loan approval. You also have to be aware of the reasons your applications can get rejected to avoid mistakes in the future:
Low Credit Score
If your parents used to tell you to spend your money wisely, they were actually right. An occasional splurge is fine but when it becomes a daily habit, you will soon find yourself in a cesspool of debt. Bad spending habits make it difficult for you to take out any type of loan. Why? Lenders will review your credit score to gauge your ability to repay them. Sure, some lending firms will approve your loan despite your bad credit history. Although, you have to shoulder the skyrocketing interest rates.
Before you consider unnecessary loans, think of its impact on your future endeavor. You can maintain a good credit score if you avoid using credit cards if you cannot afford them. If you have outstanding balances, be sure to pay them in full before your due date. Your bad spending habits are recorded in your credit history. If you have credit card payment delinquencies, you can reduce your chances of getting your mortgage application approved.
Insufficient Down Payment
Your down payment is crucial in securing a mortgage. On average, mortgages will require you to prepare 5% to 25% of the overall value of the property you are planning to buy. Although you can still make an arrangement for another person to co-sign your mortgage, once you fall behind your payments, the co-signee will be compelled to pay. The best way to address this problem is to delay your application until you have saved enough money to pay the amount required.
Bankruptcy and Debt Issues
Aside from checking your credit history, your mortgage lender will also verify if you have an outstanding debt or declarations of bankruptcy. Your credit history will include positive and negative information like debts and bankruptcies. A bad credit score stays on your history for years. Be sure that you keep your payments up to date. If you have received notices of debt collection, this information can reflect on your credit history for more than seven years. Do not let your spending habits ruin your credit report. Make debt payments a top priority if you intend to apply for a mortgage loan.
What Happens After The Lender Rejects Your Mortgage Application
The first thing you need to do once you find out that your application was rejected is to accept the lender’s decision. You will also have to know the reason your application got rejected. You should be aware that it will take time before your mortgage application will become approved. So while waiting, you need to get your credit reports, avoid applying for new credit card, be cautious of co-signing and do not close old credit card accounts. By improving your borrowing behavior and spending habits, you will be able to have better chances of getting an approval from the lender.
Cape Coral Mortgage, Inc.
3512 Del Prado Blvd. S Ste106
Cape Coral, Fl. 33904
(239) 540 5555