subject: Top Five Reasons Why Mortgage Applications Get Rejected [print this page] Are you applying for a new mortgage or a mortgage refinance? Unfortunately, it can be very depressing if you have applied for a new mortgage with the expectation of moving into your new dream home only to find out that the bank or financial institution has turned your mortgage refinance application down. All those dreams of a new home come crashing down in flames. This need not be your experience if you learn how mortgage issuers work and follow their instructions and guidance. So, what are these ways?
Below are the five most popular reasons why mortgage applications get rejected - some of them even at the final stage when you are all gung-ho about moving into the new house. Avoid these five pitfalls and you will have better chances of getting your mortgage application cleared.
1. Low Credit Rating
Do you know the first thing a mortgage lender will do when you ask them for a loan? One of the first thing the mortgage lender will do when you submit your loan application is to check your credit ratings. Checking your credit report is quite easy for a mortgage lender. Getting your credit rating can easily be obtained from all three reporting bureaus. If you're already experienced a bankruptcy, your application for a mortgage might already be a longshot. Even the occasional late payments might factor into their consideration. Everything is checked - car loans, personal loans, credit card loans, etc. You might not believe it, but lending institutions could go as far as looking into your student loan repayment before deciding on whether they should give you this mortgage or not.
2. A High Priced Property
Some sellers would peg a very high price on the property they are selling. This could be because of several factors like location, amenities, condition of house, etc. But the lenders might find such high prices quite unrealistic to finance for. If there's a property whose worth is just about 100,000 in the market, but someone is wishing to sell it for 500,000, then no seller would want to come forward to finance it. This is one more reason why mortgage applications fail.
3. Appraisal Value of Property is Low
This ties in with the above point, actually, but it is different. When you make a mortgage application, the lenders will send their experts to the venue to check out the property and to assess its market value. This step is called as appraisal. Many times, the mortgage application is rejected at appraisal because the value of the property is assessed to be lower than what is applied for.
4. Insufficient Funds in Bank Account
You are not going to get all the funding for the property from the mortgage. You will get approximately 75 - 95% of the property cost and need to make up the difference from your own assets. Plus there are the fees due at closing to consider. The lenders will dig into your bank account for these fees. If you do not have the right funds ready for them, they will reject. Many times a lender will look at your banking accounts and make the determination that you don't have enough in cash to cover your portion of the loan plus the charges for closing.
5. Too Much Debt
Reeling under too much debt is never healthy, and not at all in case of a mortgage application. Too many loans from too many other lenders, and another lender is not likely to want to burden you with another. Your level of debt can easily be see on your credit report.
