Common Reasons Why Mortgage Loans Are Denied | Trusted American Mortgage

For many people, purchasing a home is one of the most exciting and satisfying times in life. After all of the saving, penny-pinching, searching and hoping, the perfect home for you appears and it seems like it is go-time!

However, even after you do all the work and submit an application for a mortgage loan, it is never a guarantee that you will be approved right away. We offer up some common reasons why a mortgage loan may be denied below so you can adjust your lifestyle or application as needed to find the most success.

A Poor Credit Score

Let’s start with your credit score. Your credit score is a number between 300 and 850 that helps lenders determine how reliable you are with paying back loans and with how you handle your credit. The higher the number, the easier it will be to obtain a mortgage loan. If you have a credit score in the medium to low range, that can send the signal to a lender that you have trouble paying back loans or staying on top of payments.

You could also be denied simply because you don’t have a long enough credit history for a lender to make an informed decision. If that is the case, you might have to step back and work on building up your credit history for a while before trying to apply again.

Your Income Doesn’t Make the Cut

You never want your house payment to take up too much of your monthly budget that it makes it hard to make ends meet with bills, groceries and insurance on top of it. Lenders will calculate your debt-to-income ratio to help determine what kind of mortgage (if any) would fit your current income. If the proposed mortgage is too high based on what you bring in every month, you could easily end up with a loan denial.

In order to remedy this, you may have to either find a higher paying job and settle in for a while so your job history becomes more reliable, or you may have to adjust your price range and find something more reasonable for the income that you are bringing in.

Issues With Insufficient Funds

Houses cost money, there’s no denying that. The fact that houses are such a large purchase is why mortgage companies like us exist! However, you will still have to bring a certain amount of money to the table when it comes to things like closing costs and a down payment. If you are unable to come up with a sufficient down payment or contribute to the agreed upon closing costs, you will most likely be denied or the purchase agreement will be canceled.

The best way to combat this problem is to just be patient and wait a while until you are sure that you have the funds to make your purchase. Save when you can, make a budget that you can stick to and only look for homes that are in your budget so you can stay focused on what you are able to truly afford.

Ready to start your loan application? Contact us at Trusted American Mortgage to get pre-approved today.