What to Do If Your Mortgage Application Is Denied
While the home buying process has gotten more streamlined and easier in recent years, there are still many moving parts and potential points of frustration. As a first-time buyer, it’s possible you might be denied a loan—even if you get pre-approved.
When this happens, it can be easy to get discouraged. However, there are many reasons a mortgage application can be denied, so do not give up hope. Instead, review your reasons for denial to help better your odds for approval.
Why a Mortgage Application Might Be Denied
Issues involving your credit score can certainly be a big part of why a mortgage application is denied, but that alone isn’t a make-or-break point of contention. Mortgage underwriters also consider:
- Short or insufficient credit history – The length of your credit history and how you manage it is a big indicator to lenders of how reliably you can pay back the loan.
- Debt-to-Income ratios – Lenders want to see that you have enough income to cover the mortgage payments, but they also want to make sure that your total monthly debts do not exceed more than roughly half of your monthly income. Exceptions apply depending on the loan program.
- Changes in employment – Lenders prefer to see stability in your employment history, and a mortgage application could very well be denied if there are frequent, sudden, or recent job changes. Most of the time, this can be overcome with a simple explanation from the borrower.
- Unexplained large deposits –This might seem strange, but lenders are wary of bank statements showing large deposits that cannot be explained. The concern is that the money a borrower has in their account is not actual savings, but money borrowed from another source, which is not typically allowed for a mortgage transaction.
What to Do When Your Mortgage Application Is Denied
The silver lining to these reasons for application denial is that they can be spot-fixed with some diligence and time. If you’re coming up short on any of your mortgage qualifications, you can start a plan that includes:
- Talking to your lender to find out exactly what the issue is
- Building more credit with a consistent account or adding yourself to a trusted family member’s credit card as an authorized user
- Diligently paying down your debt and always paying bills on time
- Making sure that any large deposits appearing in your past couple of months’ bank statements can be easily explained and documented
Professional Mortgage Application Services
If you’re worried that your mortgage application may be denied, don’t fret. The professionals at Butler Mortgage can help you take a closer look at your financials and advise on next steps. Once you’re approved, our team can help you navigate the mortgage process and secure desirable rates that fit your budgetary needs.
Let Butler Mortgage help you find the right loan solution for you. Call us today at 407-931-3800 or fill out our free consultation form online.