Top 5 Reasons Your Bank Will Not Approve Your Mortgage

What Are the Top 5 Reasons Your Bank Will Not Approve Your Mortgage?

1. Change in Employment – Don’t get a new job, and don’t get fired. That is the biggest challenge to anyone who is in escrow purchasing a property. If you change your status at work, the lender will probably find out because they will do an employment verification just days before funding the loan, and they will halt the process if things have changed. I’m not saying they will cancel the loan every time, but 9 times out of 10 they will stop their lending process.
   
   
2. New Debts Incurred – Here’s your short list of don’ts: Don’t open or close any new credit cards. Don’t buy a car. Don’t apply for a new loan on other properties. In general, don’t do anything that might add a good bit of debt to what you have going on.
   
   
3. Appraisal Problem – If you are putting less than 30% down, and the house does not appraise for the same or more than you are in contract for, you are probably going to have an appraisal problem. Your bank will only lend according to the appraisal. If you are putting down, say 20%, and the appraisal is significantly off value, the bank will not make up the difference. You will have to come out of pocket and add those extra dollars to the deal or have the seller reduce their price.
   
   
4. Credit Issues – All lending is driven by your credit scores. Lenders have what they call “overlays” and the biggest one is credit scores. 720+ is considered excellent, 680+ is good, 660+ still gets you a good loan, and less than 660 puts you into a higher interest rate without question. Lower credit scores might also force you into an FHA loan, which also can come with mortgage insurance, an additional expense that you might not have been expecting. Even little credit dings can make your way down, so be sure that you or your lender checks your credit before getting that house.
   
   
5. Loan Changes – The lender will sometimes change their policies and guidelines in the middle of your home buying process, and your lender would have to keep you up to date to see if you still would be pre-approved for a mortgage. Sometimes it can be self-inflicted: you might decide to jump into a different loan product which can and will delay the process and or remove you from being approved for a loan product. The lender always wins, it is not something you want to fool with, trust me.
   
   
6. Inspection Problems – Okay, I gave you a bonus reason!! How does an inspection possibly affect your mortgage you ask? Well, if you happen to be getting an FHA loan or one with mortgage insurance, the lender can and will have a say about the results of an inspection. Especially if you are doing an FHA loan. The lender will look for any hazardous conditions, and force the owners or you to make changes before them funding the loan. And that is a bonus for you because you would want to fix the items they will call out anyway.