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Your mortgage application was denied. Now what?

by Kynzy Lowe

If your mortgage application has been denied, you don’t have to give up on your home ownership dreams. There are steps you can take to improve your ability to get approved for a loan.

First, it is crucial to get in contact with your lender. There are a multitude of reasons as to why an application can be denied. Learning why your application was denied will give you the chance to resolve any issues.

Let’s go over some common reasons an application may be denied.

Credit Score

There is a minimum credit score that borrowers will need to meet in order to receive a home loan. If your credit score does not meet the minimum requirement, your application could be denied, but you can work to improve your score. Although it takes time to improve a credit score, the benefit is worth the effort.

To maintain a good credit score, be sure to always pay your bills on time. Also, try to pay down debt to reduce your debt to income ratio. It is also best for your card balance to be low in relation to your credit limit. Even if you no longer use an account, do not close it, because your credit score is also affected by how long your accounts have been open. You should also limit credit inquiries and opening new credit lines; too many in a short period of time can lower your score.

Inconsistent Employment

There are certain employment requirements that borrowers will need to meet when applying for a home loan. It is favorable to have consistent employment; any gaps in your job history will be considered. Check to see if your income meets the minimum amount required for the loan you are applying for. Make sure that all of your income has been accounted for, including freelance, investment accounts, inheritances, and savings accounts.

Missing Paperwork

Carefully look over your loan application paperwork. Be careful that the information you provided is complete and correct. Ensure that you have provided all required documents. Missing or incorrect information can be a reason for a denied application.

Don’t Give Up!

It may take some time, but it is possible to come back from a denied mortgage application as a stronger applicant. At Benchmark, we take our job of helping you secure the dream of homeownership seriously. Even if you are not approved, you will be armed with the knowledge to do something about it courtesy of your Benchmark loan officer.

If you are serious about getting approved for a mortgage, contact us: we are here to help.

Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service for your new loan.

 

Benchmark brings you home.

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Assets and Your Mortgage Application

by bmadmin

When lenders evaluate mortgage borrowers, we look at four things: income (the ability to repay), credit (the willingness to repay), collateral (appraised value and property condition) and assets (cash in the deal and cash reserves after closing, mostly). Of the “four legs of the table”, assets are the least discussed, and yet may be the most important.

What do we mean when we talk about assets?

  • Monies needed for the down payment (the difference between the purchase price and the loan amount which may or may not be the same as the money deposit at contract signing)
  • Monies needed for closing costs (fees to the lender and third parties for things like appraisals, title insurance, settlement services, and so on)
  • Monies needed for Pre-Paids (homeowners insurance, flood insurance, real estate taxes, etc.) and establishing escrow accounts for future payments
  • Monies for Reserves– the money you still have left after closing. Monies that would be available, if a problem were to arise

Why do we care about assets?

  • Assets may be the truest reflection of a borrower’s fiscal strength. Their ability to save and properly budget could be a significant indicator to their future paying habits
  • The source of the assets is important. Savings? Gift or inheritance? Lottery victory? Insurance settlement? Sale of a baseball card collection? Each reflects differently on the borrower.
  • Many people don’t show all their income on their tax returns (it’s just a fact). Undocumented income can’t be used to qualify; however, often assets become a truer representation of a borrower ability to pay than their 1040s.
  • Reserves are an issue. A client with $50 in the bank after closing is riskier than one with $50,000. Also, clients who have money in the bank but have some sporadic lates on their credit are looked at differently than those who didn’t have the money to make the payments.

Common Asset Issues in Mortgage Packages:

  • Large deposits (defined as those which are excessive for the income level) raise an underwriter’s eyebrows. Where did the money come from? Maybe the borrower took a loan that doesn’t yet show up on their credit report.
  • Cash deposits are another red flag. In this day and age, people keep their money in the bank, not under their mattress. Where did the cash come from?
  • Gift monies and seller’s concessions, while considered as borrowers assets when doing calculations, will give an underwriter pause when assessing the borrower’s real ability to replay.

Guidelines have tightened. When borrowers are paying off credit cards to get their ratios in line, lenders are asking where that money came from now. That act has nothing to do with the home purchase, but may be a sign of something fragile in the borrower’s financial make up.

The best advice is to consult a loan professional to discuss the proper way to position your assets and the timing of it that will put you in the most favorable light.