Below are a few scenarios I have recently seen and wanted to share.
Let’s face it, rejection sucks, but unfortunately, it’s part of life. But when it comes to mortgages it can shake up one’s future planning.
Knowing why it was rejected, can aid in future planning and help get things back on track.
1. Vehicle loans
This is a big one and having a vehicle loan of $500 per month can reduce your mortgage pre-approval by $100,000. If you are planning to purchase a home, try to keep vehicle payments as low as possible and don’t lease or finance a vehicle if you have recently had a mortgage pre-approval.
2. Changes to your credit
After getting a mortgage pre-approval, did you open new lines of credit, finance a new vehicle, co-sign on a loan? If so, your pre-approval is now no longer valid.
3. Inadequate employment history
Mortgage applications require the past 3 years of work history, but they also look at your current employment and career as a whole. What they are looking for is stability and consistent stable sources of income. They want to feel comfortable that they are lending money to someone who is capable of paying them back. If you changed jobs often, started a new job, or have a lot of gaps in employment, lenders may need more proof that you’ll have an ongoing source of income.
4. Lack of credit history
Having credit history is proof to the lenders that you are capable of paying for loans and bills on time. Getting an approval with bruised credit can be tricky and it’s a whole other story if there isn’t any credit history.
5. Business debt
If you are self-employed and operate as a sole proprietor, all your financial liabilities are relevant to lenders. That means your business expenses and loans need to be factored into your debt-to-income calculations. If you are having challenges with a mortgage approval, you may need to pay down debt or liquidate assets to improve your debt-to-income ratio.
6. Down payment origins
Depending on the circumstances, buyers will need to provide up to 90 days of history and be prepared to explain large movements of money. If money is being gifted from a loved one, they will have to sign a gift letter stating the money isn’t a repayable loan and the money will need to be tracked back to them.
7. Property standards
The property must meet certain property standards. If the home is missing a kitchen, has structural issues, no potable water, isn’t inhabitable, etc. a bank/ lender may decline financing.
Whatever your reason was for having issues in getting financing, feel free to connect and I would be happy to review your file and see what can be done to help you. Sometimes a second set of eyes and someone who works with many different lenders might be what you need.