Reasons You Could be Turned Down for a Mortgage
Buying a house is in your plans. You’re searching online, you make the decision to pull the trigger and then BAM just like that you’re turned down for a home mortgage. It happens and you’re not alone. There are plenty of people who have been turned down for a mortgage. Knowing why can help set you up for success in a very short amount of time.
When turned down the first thing I would do is talk to your loan officer about what happened and what the next steps are. Some of the reasons people are turned down for a mortgage are….
Bad Credit– The biggest killer to getting a home mortgage is credit. While I always tell people that you don’t wear your credit score on your forehead it’s still a good idea to not let your credit run all buck wild. When you apply for a mortgage the loan officer is going to pull your credit. If you’re in the 700-800 credit score range, you will be in good shape. Anything below 700 will present a challenge. It can even mean a higher interest rate. In some cases, there are just bad debts that are showing up and sometimes all it takes is a good sweeping of your credit report. That’s generally easy to fix and takes about 45 days. All hope is not lost! If you’ve had a bankruptcy then you’ll be required to wait about 7 years to get a mortgage. The same holds true for a foreclosure. A short sale– the guidelines are a little more lax.
Small Down Payment–Here’s the deal.. if you’re shopping online and playing around with mortgage calculators online then you’re going to need to have some sort of downpayment to buy a home. Let’s take FHA loans for example, you’re going to need 3.5% to put down. Say you’re looking at a $300,000 home that means you’re minimum down payment — for the home only– is $10,500. That doesn’t include your closing costs– which can be negotiated in a buyer’s market. Add another 2% to that or about $6,000. So the minimum you’ll need on a $300,00 purchase is about $16,500. Give or take a few bucks.
Bad Debt to Income–Commonly referred to as DTI, the debt to income ratio can throw you off and kill your chances of getting a loan. So what is DTI? That is your over all debts divided by your income. If you have too many credit cards and car payments and other outstanding debt that can kill the deal faster than it took you to fill out the loan application. You need to have a credit history when buying a home but you have to be responsible when it comes to using credit.
Employment–Typically, you need to have a track record when it comes to buying a home and in order to do that, you have to have a job. The bank you are borrowing money from wants to know you have the cash to come to the table every month to pay the note. Seems obvious enough, right. If you’re moving from one city to another for a job transfer and you want to buy a home–that’s usually fine. You just have to show you’ve had and now have a new job. So don’t worry. One time, I had a client who took 6 months to recover from breast cancer. She was employed, went on disability and then came back. That’s an exception — however, she was approved and we closed her home.
If you have questions about buying a home contact Jeff Brick at Citywide Home Loans at 858-324-4448. You can also send him an email to firstname.lastname@example.org
If you have questions about buying a home anywhere in the United States or Canada call us at 619-320-5467.
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