While being declined for a home mortgage loan can be an incredibly frustrating and disappointing experience, especially considering all of the hard work that goes into applying for one from the start. However, understanding why you were declined is key, as you will be able to use that information to take control of your financial life and make sure you have a healthy future. The good news is that just because you were denied a home mortgage loan once, does not mean you will be denied one next time if you take the right steps. Lenders always send a formal rejection letter which cites the exact causes of your rejection, so you’ll know everything you need to improve. Here are some of the most common reasons for home mortgage loan rejection.
Lacking Credit History
Your credit history allows lenders to determine whether you are a risky investment or not. Lenders not only look at your minimum credit score but also look for black marks such as foreclosures and bankruptcies. Most lenders consider a FICO score of less than 620 too low to approve.
Not Enough Income/Asset Documentation
A lender looks at your income to debt ratio before accepting or denying you. Even if you have sufficient funds to handle payments, if these earnings are not properly documented on paper, a lender will most likely deny you. Be prepared with documentation and several years of tax returns.
A Larger Down Payment Is Needed
Lenders look at down payments as investments in their future homes, so an incredibly small down payment makes them uneasy. A larger down payment is always better when it comes to satisfying your home mortgage loan application requirements. Usually, homebuyers make down payments that equal roughly %-25% of the total value of their future home.
You Employment History Is Not Solid Enough
An inconsistent employment history can make getting a home mortgage loan very difficult, as lenders want to be sure you have consistent enough work to afford future payments. In fact, many lenders require at least two years of consistent employment.
Don’t Give Up, Call Simply Referable!
Together, with your Simply Referable team, you’ll cut the right deal for the right price with qualified guidance every step of the way. Every team member is committed to selling your home and forming a lasting bond with your family. Thanks to our roots in the Maryland/DC region, we can help you find your dream home. Contact us online and give us a call at 410-983-9045. To see some of the stunning homes we work with, follow Simply Referable on Facebook, Twitter,Google+, Pinterest, YouTube, and LinkedIn.