Emergencies occur when we least expect them, and to ensure long-term financial stability, it’s best to have a plan to weather them. When an emergency happens, be it a natural disaster, illness, or job loss, many people can find themselves struggling to keep up. Here are five essential tips to help you save for an […]
The 5 most common reasons why mortgage applications are declined
Getting your mortgage application denied is dispiriting, but that doesn’t mean you’re out of the race. When you know why your application was denied, you can take steps to remedy it.
Here are some common reasons a mortgage application may be declined:
Income can’t be proven
Proof of income is a very important part of applying for a mortgage loan, as it shows the seller that you have the funds to make a purchase. You not only have to have the funds, but you must be able to access it and have the legal right to use it. Provide your lender with your bank account information and they should let you know if anything else is needed to verify the proof of funds.
Too many credit applications
Credit is essential to our lives today but too many credit checks at once can possibly appear as poor money management in the eyes of lenders. For example, don’t apply for credit to purchase new furniture for your new home just yet. Too many applications can also lower your credit score, so only open new lines of credit if you absolutely need it.
Poor credit history
A poor credit history is one of the most common reasons an application is denied. When this occurs, work on raising it before applying again. This can be done by:
- Disputing errors on your credit report
- Requesting the removal of negative entries
- Paying bills on time
- Only requesting new lines of credit when necessary
Mistakes or inconsistencies in the application
Mistakes or inconsistencies in your application can cause it to be denied if they aren’t fixed. Before submitting your application, double check all your information for accuracy. If a mistake is present, contact your lender to get it updated. Under the Fair Credit Reporting Act, “both the credit reporting company and the information provider are responsible for correcting inaccurate or incomplete information in your report.”
You have recently foreclosed on a home
If you’ve recently lost your home to foreclosure, there is a mandatory waiting period before you can apply for a mortgage again. If you apply before that time is up, you may find your application declined. The typical waiting period is two to seven years, though there are times when the period can be shortened or waived. Talk to your lender about your options.
If you were denied for a mortgage but your have the income and credit history to support a loan, it may help to get a second opinion, or ask your current lender if there are other loan programs you might quality for. Get as much information as you can from your lender about your rejected application. Make a plan to correct the issues and you can apply again with a better chance of approval.