"We are sorry to inform you.."No one attempting to get new mortgage loan or refinancing an old one wants to hear or see this phrase. however last year over two million borrower applicants were declined for a mortgage
loan, most common reason was they did not meet particular lender requirements or
due to their applications being incomplete or otherwise challenging. And those
numbers, obtained from the Examination Council of Federal Financial
Institutions, doesn’t even take into consideration those who throw in the towel
on the often complex mortgage qualifying procedure. an estimation by the national Mortgage Bankers Association figures that almost half of those home-owners who attempt to refinance while 30 percent of home-buyers either drop out or are denied.
Many people have banged up credit while the lenders’ underwriting standards have gotten more demanding during recent years; while a few banks become tighter that the federal requirements. Below are some of the main reasons for being declined, according to experts in the mortgage industry.
HAZY FINANCIAL OUTLOOK Typically, the total debt payment ratio, including the mortgage, must not be in excess of 45 or 50 percent of gross adjusted monthly revenue. Borrowers are often surprised to discover what does and doesn't count. Bonuses and overtime are only counted if you've been withy the same employer a minimum of two years, and include a history of getting them,. Lenders often will not count rents received from a rental unit you already own, unless your equity in it is least 30 percent.
APPRAISAL TOO LOW Although you may believe the home you're buying or refinancing has a value around $500,000, however the appraiser feels it's closer to $400,000. All of a sudden your new mortgage loan is in
problematical. This has become the main reason home loans are declined today, according experts in the industry.
TOO LITTLE INCOME Just about all lenders want to ascertain you have the
wherewithal to make the payments on the mortgage. Someone earning, $40,000 per year should not attempt to buy a $650,000 home, unless they have a trust fund and receive quarterly distributions or other available funds. Typically, lenders also look for a two-year minimum income track record , which could detrimental those borrowers who may have recently changed jobs. Getting turned down is common if there's an employment history gap during the past two years,
LOW FICO SCORES (POOR CREDIT) Lenders routinely reject applicants having FICO score less than 620, A few lenders even draw the line somewhat higher, nearer to 660. Zillow data indicates that almost one third of Americans credit scores are so low they're not likely to obtain any type mortgage. Not making your mortgage in a timely fashion becomes a big hit on your score. If you have even one late mortgage payment within the past two years, diminishes the likelihood of obtaining another mortgage.
PROPERTY PROBLEMS Sometimes, issues come up within an apartment unit, building, or house, such as a major fix or safety issue that must be taken care of before an application may be granted. Other times, it could be financial problems within a condominium association or a co-op, such as having too many owners behind on their dues, or uncompleted common areas or facilities.
INFORMATION CONFUSION Almost 12 percent of applications for new mortgage loans were declined because of incomplete credit applications or unverifiable information, in a report by the Federal Council for Financial Institutions. This also includes misinformation: If you have a tenant in a property you're attempting to refinance, however your application is for a mortgage
that's owner-occupied could be rejected.
Oct 20, 2011
Real Estate Financing Books