Before focusing on mortgage application rejection which is always a nightmare for potential homebuyers, lets first get to know what the meaning of a mortgage is. A mortgage is a debt that is secured by some real estate property owners. The homebuyer is obligated to make predetermined payments with some calculated interests.
When it comes to owning a home most people prefer mortgage application due to the high cost associated with the construction of a house. The process of applying and securing the loan is often long, and at times it is not 100% guaranteed. Seeing your mortgage loan application get declined can be a disappointment. However, this could be due to a number of reasons why.
Understanding the occurrence of mortgage application rejection can be a valuable learning experience as it gives you room to recognize specific areas where you could have gotten it all wrong. Below are some common mistakes that home buyers make knowingly or unknowingly. So before you decide on becoming the next homeowner here are some things you need to keep in mind.
1) Poor Credit History
Consider checking your credit worthiness before applying for a home mortgage loan with credit reference agencies. This gives you access to information about your credit history which lenders use to determine whether or not you are a risky investment. Also, if the available information is wrong, you can always correct it.
2) Inadequate Income
An assessment at your income to debt ratio can quickly tell your lender if you are in a position to afford a mortgage loan. While you may think you have enough money to service your mortgage and pay your monthly bills, it might not be the case if you cannot document this income.
3) Inadequate Employment History or Job Changes
A consistency history in employment is a crucial requirement needed before approval of your loan. It gives a clear picture of whether you can hold down a job long enough to pay back your mortgage or not. Most lenders might also need to see two years of consistent employment. Therefore, if you probably want to buy a house consider not changing jobs until after you apply for your mortgage loan and it gets approved.
4) Exaggerated/Wrong Information on your Loan Application
Do not give any wrong information on your application as lenders already have every single financial detail about you. Be honest to avoid grievous repercussions such as tarnishing your record as a result of mortgage fraud which is a federal offense.
5) Failure to Registered as a Voter
You need to be on the voters register at your current residence. This helps your lender to confirm information of who you are and where you live before they process your loan.
6) Problems with the Property
A mortgage application rejection doesn’t always have to do with issues concerning the homebuyer. Atimes, the value of the property may not be enough to back the mortgage loan, and therefore it ends up being declined.
As a loan borrower, you have the right to ask for an appraisal, but this does not always result in a higher appraised value of the property.
7) Too many Credit Applications
Upon a loan application, your lender automatically searches for your credit report to ensure your suitability. These searches are recorded to show your credit history. Applying for loans often paints a picture of how you have a lot of problems. You should, therefore, make sure to avoid applying for new lines of credit before applying for a mortgage loan.
If you have ever had a mortgage application rejection, it could be as a result of one of the above reasons. However, this should not hinder your efforts to getting yourself a home. With a little patience and some extra hard work, you can always find yourself in a position to secure a mortgage loan. Just ensure you are aligned with all the requirements.