Nobody likes to admit it but at some point, almost all of us have been declined for a loan at some point. What happens if you’re turned down for a mortgage when you feel leave done everything right, saved a little bit of money and have your credit under control?
Honestly, if you have reserve funds in the bank, you had a stable job for a couple of years, have decent credit and pay all of your bills on time, there’s no reason that you shouldn’t be able to obtain a home loan of some kind. However, you want to do your shopping the right way. A good mortgage broker will help find a solution that will work for you immediately and if not immediately, give you the plan to help you on the road to home ownership within the next 6, 12 or 18 months. Unfortunately, if you are turned down for a loan, most underwriters are not going to tell you exactly why. A mortgage broker or loan officer may be able to give you some hints or tips as to why you might have been turned down and provide you with a good plan of action going forward.
When you apply for a home loan, lenders and underwriters look at three major issues: your credit, your income and any assets you may have. Any of these factors could hurt your chances of obtaining a home loan and having too much debt are usually the most common roadblocks. Lenders have been more careful in the last few years about verifying income sources. They want to make sure that you are honest in how much income you receive each month, that you have a stable job with regular income, decent assets and of course a good credit score. The credit score is vital in telling lenders that you pay your bills on time and that you don’t have a lot of debt accumulated. Any major issues can usually be fixed or corrected within just a few months.
One of the best ways to get started and to increase your chances of getting a home loan is to get your credit reports and understand everything that’s on them. If there are mistakes, errors or delinquent accounts, correct them as quickly as possible and if they cannot be corrected, write a letter stating why or why not.
If you are self-employed you want to plan even further ahead by having at least two or three years of tax returns. Lenders will take a look at your net income instead of your gross income and you’ll need to provide some type of verification that you are steadily employed.
If you can, pay off as much debt as possible before applying. The fewer debt responsibilities you have to make lenders feel that you can take on more of a home loan payment.
And finally, having a great mortgage broker or loan officer to help you along the way is really crucial in getting the right loan and program for you. Because I deal personally with each one of my clients I can help connect you to a lender that works for you, a low-interest rate, and speak directly with lenders about how to get the best loan for your needs.