7 reasons why your mortgage application was denied There are few things more nerve racking for homebuyers than waiting to find out if they were approved for a mortgage loan.
Nearly 627,000 mortgage applications were denied in 2015, according to the latest data from the Federal Reserve, down slightly ( 1.1%) year over year. If your mortgage application was denied, you may be naturally curious as to why you failed to pass muster with your lender. There are many reasons you could have been denied, even if you extremely wealthy or have a perfect 850 credit score. We spoke with several mortgage experts to find out where prospective homebuyers are tripping up in the mortgage process. Here are seven reasons your mortgage application could be denied: You opened a new credit card or personal loan Taking on new debts prior to beginning the mortgage coach outlet coupons 6 flags application process is a no no, says Denver, Colo. based loan officer Jason Kauffman. That coach outlet atlanta track includes every type of debt from credit cards and personal loans to buying a car or financing furniture for your new digs. That because lenders will have to factor any new debt into your debt to income ratio. Your debt to income ratio is fairly simple to calculate: Add up all your monthly debt payments and divide that number by your monthly gross income. A good rule of thumb is to avoid opening or applying for any new debts during the six months prior to applying for your mortgage loan, according to Larry Bettag, attorney and vice president of Cherry Creek Mortgage in Saint Charles, Ill. For a conventional mortgage loan, lenders like to see a debt to income ratio below 40%. And if you toeing the line of 40% already, any new debts can easily nudge you over. Before they were able to close his loan, they had to get a statement from Best Buy showing what his payments would be, and the store refused to do so until the first billing cycle was complete. avoid it all by not opening a new line of credit. If you do, your second call needs to be to your loan officer, says Herrick. to your loan officer if you having your credit pulled for any reason whatsoever. employment history is inconsistent Most lenders prefer to see two consistent years of employment, according to Kauffman. So if you recently lost your job or started a new job for any reason during the loan process, it could hurt your chances of approval. Changing employment during the process can be a deal killer, but Herrick says it may not be as big a deal if there is very high demand for your job in the area and you are highly likely to keep your new job or get a new one quickly. Even then, some employers may not agree to or be able to verify your employment. Furthermore, if your salary includes bonuses, many employers won guarantee them. Bettag says one of his clients found out he lost his job the day before they were due to close, when Bettag called his employer for one last check of his employment status. was in tears. Friday, and we were supposed to close on Saturday. You missed a debt payment During the loan process, any recent negative activity on your credit report, which goes back seven years, can raise concerns. The real danger zone is any activity reported within the last two years, says Bettag, which is the time period lenders play closest attention to. That why he encourages loan applicants to make sure their credit reports are accurate and that old items that should have fallen off your report after seven years aren still appearing. things show on credit reports beyond seven years. That a huge issue, so we want to get dated items removed at the bureau level, Bettag says. For first time homebuyers, he cautions against making any late payments six months prior to applying for a mortgage. They won always be a total deal breaker, but they can obviously ding your credit, and a lower credit score can lead to a loan denial or a more coach handbags outlet prices expensive mortgage rate. Existing homeowners, Bettag says, shouldn have any late mortgage payments in the 12 months prior to applying for a new mortgage or a refinance. are workarounds, but it can be as laborious as brain surgery, says Bettag. You accepted an unexpected monetary gift Your lender will be on the lookout for any out of place deposits to your bank accounts during the approval process. Bettag advises homebuyers not to accept any large monetary gifts at least two months or longer before you apply, and to keep a paper trail if the lender has any questions. Any cash that can be traced back to a verifiable source, such as an annual bonus, or a gift from a family friend, could raise red flags. This can be tricky for homebuyers who are relying on help from family to purchase their home. If you receive a gift of money for a down payment, it has to be deemed by your lender. The definition of acceptable depends on the type of mortgage loan that you are applying for and the laws that govern the process in your state. However, the gifted funds may not be eligible to use as a down payment for a conventional loan through a bank. You moved a large amount coach outlet atlanta constitution of money around Ideally, avoid moving large sums of money about two months before applying. Herrick says many borrowers make the mistake of shuffling too much cash around just before co signing, making themselves look suspicious to bank regulators. Herrick says not to move anything more than $1,000 at a time, and none if you can help yourself. For example, If you considering moving money from all of your savings accounts into one account to deliver the cashier check for the down payment, don do it. You don need to have everything in one account for the cashier check for your closing. You can submit multiple cashier checks.
All the lender cares about is that all of the money adds up. You may be able to simply avoid some of this hassle by arranging to pay using a wire transfer. Just be sure to schedule it in time.
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