Top 6 Reasons For Being Denied A Mortgage
One of the first steps to buying a new home is getting a pre-approval from your lender. This is important because it gives you an idea of your price range, and it also shows the home sellers that you are serious. It’s easy to assume that once you are pre-approved all you have to do is find a home, and sign some papers. However, you could still be denied a mortgage even after being pre-approved. Check out the top 6 reasons for being denied a mortgage after being pre-approved.
To avoid finding yourself in a situation where your loan is denied even after being pre-approved, you will need to understand the most common reasons it happens.
1.) Taking on Additional Debt
Your pre-approval is based on your current situation. By taking on additional debt you could potentially eliminate your chances of getting a loan. I always recommend not making any large purchases or applying for any credit during the loan process. If you have any questions regarding this during the process feel free to ask. Also, taking on new debt can affect your credit score, which leads us to number 2 on the list.
2.) Negative Items on Credit
Your credit is a very important part of your loan approval. As I said, taking on new debt can affect your score, but missing a payment or maxing out a credit card will affect it even more. Make sure all bills are paid on time, even one late payment could get your loan denied. Even if your credit score dropping doesn’t get you denied a mortgage, it could absolutely raise the interest rate you will receive.
3) Incorrect Information/Fraud
Giving incorrect information to your loan officer, whether intentional or not, is not a great way to get your loan approved. As a loan officer, I want to make the loan process as smooth as possible. I can only do that if all of the information I receive is as accurate as possible. The best way is to provide income documents like W2s and tax returns at the time of application. If that isn’t possible be sure and explain the details of how you are paid, i.e. overtime, commissions, or any other form of income outside of an hourly or salaried wage.
4) Job Changes
Your employment status is another important part of your loan approval. The lender has to know you are capable of making your mortgage payments on time, and underwriters look closely at your job history and income. There are certain requirements for employment history, and if you change jobs this puts it in jeopardy. Now, if you are staying within the same line of work it may not be an issue, but always discuss any potential job changes with your loan officer.
5) Appraisal Issues
The appraisal is typically one of the last hurdles for a home-buyer during the loan process. Now, it is uncommon for appraisals to come in lower than the purchase price. The reason for this being that most people are not trying to overpay for a home, however, in a market as competitive as it is right now it can definitely happen. You can be denied a mortgage if the appraisal comes in low because you’ll either have to bring in more money to closing, or negotiate the price down with the seller.
6) Loan Requirement Changes
This is much rarer now, but it used to be more of an issue in the past. One good example is if HUD were to raise the cost of their Mortgage Insurance Premium. If you were pre-approved before it was raised, and then got a contract on a home after, it could be an issue.
How To Avoid Being Denied a Mortgage
To avoid being denied a mortgage you’ll want to get a Diamond Approval. With the Diamond Approval from the Doug Haldeman Team your loan will be fully processed for income and credit, avoiding any surprises and giving you the strongest approval letter available. Call 314.472.DOUG (3684) to get approved today.
Podcast: Play in new window | Download
