Everyone would like to get approved for a home loan when they first apply and there’s nothing wrong with that. But your question is: How do you get a mortgage application approved? How-to articles are excellent, but they don’t always tell you about potential missteps in the appliance process. Here are the top three reasons loan officers deny applications and the best way to avoid making them according to the Local Records Office.
Bad Credit
It shouldn’t be a surprise that mortgage lenders are trying to find a good credit history in a home loan applicant. As with any big purchase, your credit score will affect the approval and mortgage rates if you’re approved. Bad credit ensures banks deny risky financial transactions. Would you lend money to someone who has a known history of not returning borrowed money? If you did, you would want to take additional measures to justify taking the risk. So, if you’re interested in taking out a home loan, now or 20 years from now, start cleaning up your credit history. Make payments on time in addition to improve your credit.
Poor Repaying History
Just as much as mortgage lenders want you to get a good history of repaying debt, they also don’t want you to carry various debts. A high debt to asset ratio indicates a lot of outstanding debts. Carrying too much debt signifies the potential that you overextend yourself financially, which could ultimately lead you to default on your loans.
In the event you default, then they don’t get their money back. So, in order to stop a denial based on having a lot of outstanding debts, simply pay off your debts before applying for a home loan. Or at the very least, significantly decrease them.
Low Employment History
Aside from the applicant’s credit score, the biggest potential indicator to be able to repay a home loan is usually employment status. Mortgage lenders are trying to find income stability. If an applicant has just started a new job within the last few six months or has a brief history of changing jobs frequently, they could present a high risk for repayment and turn into denied.
Self-employed individuals, unfortunately, fall into this category, by simply providing proof of profitability you are able to turn things around. For others, in order to avoid this, be sure to find employment that one could stick with for years. This will not only assist you to with any debts you are usually carrying, but also help increase your chances of a home loan approval.
Banks and mortgage lenders are strict about the stipulations of their money. A good credit history, debt to asset ratio, and income stability may help you quickly get approved for a home loan. With this information in mind, start planning now.