Mortgage Application Rejected
The Times Have Changed
You found the house you want to buy and now you have to arrange financing for the mortgage. Wading out into the sea of lenders and financial institutions can be daunting at the best of times. The requirements for a mortgage loan are more stringent now, especially since there were so many homeowners unable to pay their mortgages when the economy turned bad. Now, there's a glut of houses available, truly a buyer's market, but obtaining a mortgage isn't quite as easy as it was. If you've applied for a mortgage and been turned down for reasons you don't understand, then perhaps we can shed some light on the possibilities.
There are some very common reasons a lender will reject a mortgage application, although the frustrating part of it is that lenders are not legally bound to say why they turn an application down. In order to avoid some of the pitfalls of securing a mortgage, it is good to know the possible reasons for a rejection.
Credit Score Counts
Your credit score is affected with every application for a loan. So, if you decide to apply for a mortgage, the credit search is recorded on your report and remains there for a period of one year. If you apply too often, the high number of credit searches becomes a red flag for the lender, signifying potential problems. The lender may believe you have financial difficulties, like too much of an existing debt load, and you become a risk for default in the lender's mind. It also could be interpreted as potential fraudulent activity. To increase the likelihood of having your application accepted, the expert advice of a mortgage broker is useful.
"I Owe No Man Anything"
If you have a sterling record of never having borrowed a cent in your life, then your application actually is in jeopardy. Lenders like the security of knowing you have borrowed and paid back monies in the past. Without this information, the lender does not know whether you can comply with their credit agreement. If you have credit cards or other credit activities, then make sure you have made at least six regular and timely payments on them before making application for a mortgage loan.
"I Owe, I Owe - But I Haven't Paid"
On the other hand, if your credit rating is poor, the chances of obtaining a mortgage loan are slim to none. Missed payments and late payments spell rejection when it comes to conventional lending. It is possible to apply for a mortgage for bad credit which means the interest rates are considerably higher. However, it is possible to get a loan through this avenue if your credit is poor.
The Sky Is Falling...
Negative equity is the result of falling property prices. With the recent economic downturn and the sudden glut of houses on the market, it may mean remortgaging the property will have to wait until values go up again. In a negative equity situation the mortgages and loans on the property exceed the value of the house in the marketplace, making the situation a bad risk for the lender.
Voting Is A Privilege And Useful As Well
If you haven't registered to vote, your application may be rejected. Lenders use the electoral register to confirm whether the person applying for the loan is who they say they are and lives where they say they live. Besides being a privilege, registering as a voter can aid in your application for mortgage money.
When all is said and done, be sure that you are making the proper application for the proper type of mortgage loan. If you have bad credit, be sure you are making a bad credit mortgage application rather than a conventional application. Check the criteria and make sure you are not applying too often.
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