Why Was Your Mortgage Loan Application Denied?

Shopping for a home can be one of the most exciting times of your life. Unfortunately, if you receive one mortgage loan application denial after the next, this joy can soon turn to pain.

With this in mind, it’s important to understand the most common reasons for a denial. This information can help you adjust your approach, thus increasing your chance of an approval in the future.

Here are five common reasons for a mortgage loan application denial:

•    Requesting too much money. Let’s face it: you can only afford to borrow so much money based on your income, credit history, and current debt load. You don’t want to request too much, as this is one of the quickest ways to receive a denial.
•    Poor credit history. If you have poor credit history, complete with a low credit score, you’ll find it much more difficult to receive an approval. Do your best to boost your score and solidify your history before completing an application.
•    Lack of a down payment. A down payment is one of the better ways to reduce the risk taken on by the lender. For example, if you have at least 20 percent to put down, it drastically increases your chance of an approval.
•    Insufficient income. Simply put, your lender wants to see that you earn enough money to pay your mortgage along with your other bills. If you don’t have enough income you can’t expect to receive an approval.
•    Spotty employment history. There’s a big difference between someone who has held the same job for 10+ years and an applicant who has bounced around from one position to the next. A strong employment history will definitely work in your favor.

If you receive a mortgage loan application denial, don’t turn your head and forget about it. Instead, find out what went wrong so that you can make the appropriate changes in the future.

Have you run into this issue in the past? What did you do about it? Do you have any suggestions for others who may receive a mortgage denial?