4 Reasons That Most People Get Denied Home Mortgages
home mortgage
A hot real estate market makes it look like anyone can get approved for a mortgage loan. But it’s not that easy for everyone.
If you are steadily employed with reliable income, that can help, but there are other reasons why you may not be eligible for a home mortgage.
Uncertain Employment
If you have not had your present job very long, or if your job is just part-time, your income may not be sufficient to get approved for a mortgage loan.
Freelance employment like writing and catering can be difficult to predict since the income from these occupations can fluctuate significantly.
Contractor jobs are often viewed the same way by lenders unless you can show two or three years of tax returns that report an income level that will qualify for a mortgage loan.
Low Credit Score
Your credit score is one of the most important things that lenders will check to learn about your financial history.
People who skip monthly payments and get behind on their credit balances or who make partial payments are often not considered to be a good risk for a home loan.
Frequent opening and closing of credit accounts can weaken your credit score as well.
Sometimes an accidental error can lower your score, so check your credit report each year to ensure its accuracy.
Heavy Debt-to-Income Ratio
Even high earners can be turned down for a mortgage loan if they carry substantial debt balances.
Lenders use a basic rule of thumb to determine whether your debt load can accommodate a home mortgage along with your regular consumer debt payments and living expenses.
If you are planning to buy a home, pay off some of your credit card balances before applying for a home loan to have a better chance of being approved.
Inadequate Financial Reserves
Another piece of the mortgage loan puzzle is whether an applicant has financial assets in reserve in case they are needed for future mortgage payments in an emergency, such as losing your job.
Assets could include an investment account, a savings account, rental property, or a valuable collection that can be liquidated if needed.
For more information about the type of financial assets, you should be accruing, consult a home loan expert like AJM Mortgage Inc for details.
Optimize your chances of being approved for a mortgage loan by maintaining a solid work record, paying off consumer debt, building your credit score, and increasing your financial assets.
Category: Mortgage
