Below are the five most popular reasons why mortgage applications get returned. Some of them even at the final stage when you are all ready to move into your new house. Avoid these five mistakes and you will have better chances of getting your mortgage application cleared.
A. Your Credit Rating is Too low:
One of the first thing the lender will do when you submit your loan application is to check your credit ratings. You credit report is easily available to lenders on request if you have submitted an application to them. They can even get your credit rating from all the three crediting bureaus. If you have had a bankruptcy or a liquidation of assets, your mortgage application might be already shot. Even things like late payments can be too bad. All kinds of loans are checked – your credit card loans, your personal loans, your business loans, etc. You might not believe it, but lending institutions could go as far as looking into your student loan repayment before deciding on whether they should give you this mortgage or not.
B. The Price of The Property Is High:
Most sellers would peg a very high price on the property they are selling. This could be due to several factors like location, amenities, condition of house, etc. But the lenders may find such high prices quite unrealistic to finance for. If you find a property that is worth about $ 100,000 in the market, and someone is wishing to sell it for $ 500,000, then no seller would want to come forward to finance it. This is one more reason why mortgage applications fail.
C. The Appraisal Value of Property is Low:
This ties in with the above point, actually, but it is different. When you make a mortgage application, the lenders will send their experts to the venue to check out the property and to assess its market value. This step is called an appraisal. Many times, the mortgage application is postponed at appraisal because the value of the property is estimated to be lower than what is you applied for.
D. Insufficient Funds in Bank Accounts:
You are not going to get all the funding for the property from the mortgage. You will have to shell out 5 to 25% of the value from your own pocket. Then there are going to be a vast assortment of fees to be paid. The lenders will dig into your bank account for these fees. If you do not have the right funds ready for them, they will reject. Yes, many lenders just reject without justifying the reason, when the actual reason might be that they have looked into your bank account and made the impression that you would not be able to pay the remaining charges and property value.
E. You Have Too Much Debt:
Reeling under too much debt is never healthy, and not at all in case of a mortgage application. If you have too many loans that you are somehow juggling, the lenders would not like to burden you with another. Again, the credit agencies can tell your lenders exactly how much undesired you are.