Buying a home is likely to be the biggest financial decision you are likely to make so it can be very disappointing to find that your dreams of homeownership are put on hold when your loan application is turned down.
There is no reason to lose hope and you can often find a way to finally get that approval and buy a home with the help of a mortgage.
Here are some insights and tips on why you might be getting rejected and how to turn rejection into approval. There is an overview of how to prepare properly before applying, why your existing level of debt matters and how to improve your approval odds with the right lender.
You have to expect your finances to come under the spotlight
Applying for a mortgage loan is not a decision many of us take lightly and the amount of money you are asking to borrow is normally a lot more than you would ever ask for with any other type of personal loan, which is why you can expect your finances to be scrutinized.
Timing can be everything with your application and it often pays to get your financial situation in order before you even begin to look at your mortgage lending options.
It makes sense to start by checking your credit rating and making sure that there is nothing on your file that is going to be a red flag to lenders, like a default on a previous loan for example.
Mistakes can sometimes happen, so it is wise to check regularly and see that your rating is as good as it can be because this is a big part of the initial application process and the first hurdle to clear.
Make sure you can provide proof of the income you need for the size of the loan and check your bank statements to see if they demonstrate that you can afford to make the loan payments.
One of the major reasons why lenders reject a mortgage application is due to the fact that they think your debt-to-income ratio is too high.
As a general guide, most lenders tend to like to see that the total amount of your monthly debts, which includes the proposed mortgage loan you are applying for, doesn’t exceed 45% of your gross monthly income.
If your current debt payments add up to a bigger percentage than this already, this will be a good reason why your loan gets rejected.
The best thing to do is to work on getting your debt levels down. Pay off your credit card if you can and clear existing loans as quickly as you can. Even if this means putting off your dream of home ownership for a year or so, if you improve your debt-to-income ratio it will make a big difference to your chances of getting an approval.
Not all lenders are the same
Although mortgage lenders rely on certain basic information to make a decision on your loan application you will find that some are more flexible than others.
You don’t want to be making multiple applications to different lenders as that can harm your chances of success if they see you are getting rejected elsewhere, but it is definitely the case that some lenders are more lenient than others with their approval criteria.
It can help to use a broker who knows what each lender is looking for, so that they might be able to match you up with a loan provider who is more likely to say yes and allow you to turn your dream of owning a home into a reality.
Elise Dennis holds a job in the mortgage department and takes to the internet to share some do’s and dont’s that people can follow to help them get a loan or mortgage that is right for them.
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