“I’m sorry … your mortgage application was denied.” Those are words no home buyer wants to hear. But sometimes it happens. Does it mean that all hope for buying a home is lost? Not necessarily.
Since the mortgage approval process is rigorous, there are a number of factors that could trigger a denial. The key is to find out why. Your lender should tell you exactly why your mortgage application was denied. In some cases, you may be able to quickly rectify the situation and turn the denial into an approval. In other cases, fixing the issue can take some time.
Here are some of the more common reasons that could cause your mortgage application to be denied.
- You recently opened a new line of credit or took out a personal loan. Taking on a new debt obligation can negatively affect your debt-to-income ratio. In simplest terms, your debt-to-income ratio is the total of all your monthly debt payments divided by your gross income. Ideally, you want to keep your debt-to-income ratio below 40%. If you couldn’t resist the opportunity to save 20% by opening a new department store credit card, pay off some debt, wait a few months, and try again.
- You recently missed some debt payments. Missing payments, even if you innocently “forgot,” will definitely trigger a denial. Most lenders are most concerned about missed payments in the immediate two years; however, many credit reports will show late payments as far back as seven years, and some even longer. If your credit report is showing very old missed payments, try to get those items removed from your credit. If the missed payments are more recent, talk with your lender about the situation. If it was an extenuating circumstance, and if you have proof of that, they may be able to overlook it.
- You forgot to include important information in your mortgage application. Triple check all the numbers and data you report. For example, did you forget a zero in your figure when reporting income? Did you forget to report that “no payment due for three years” loan that’s showing on your credit report? Be thorough in your application. If you realize your forgot anything or made a mistake, fix it immediately.
The good news is that finding out your mortgage application was denied doesn’t mean your home ownership dreams are over. It simply means you have a little more work to do. Fix what needs to be fixed, and then apply again. Before you know it, you’ll have that approval … and the new home … you’ve been dreaming of.
Is applying for a mortgage in your future? Contact us. As mortgage bankers, we can help you make the best decision for your needs.
Have Questions, Reach out to me for more information.
Call me at (707) 254-8891
Hilda Hensley Branch Manager – Mortgage Advisor
NMLS id 280206
Benchmark Mortgage
Ark-La-Tex Financial Services, LLC NMLS id 2143
