There is a misconception that once you apply for a mortgage, you will be automatically accepted and offered the loan. However, this is not always the case. Even though the mortgage rates are at their lowest, there are some criteria surrounding who qualifies for a mortgage. Additionally, these standards have become strict make it difficult for a fraction of Americans to acquire a home. In 2011, over 2 million mortgage applications were declined.
While many people know that you need to have a good credit and manageable debt to qualify, City Creek Mortgage says there are some less-known factors that can have your application rejected.
Here are some of them:
Closing a credit card account you never use
Eliminating any sources demonstrates that you are better able to manage your finances right? Unfortunately, the same rules for opening an account also apply when closing it. Closing your line of credit can do more harm than good. If lenders cannot find your credit utilization ratio, this reduces the amount of credit to your name and tells the lenders that you might be a risk.
You just acquired a new credit card
When applying for a mortgage, you need to keep your credit at the same level until getting the approval. However, obtaining a new credit after submitting your application can interfere with the review process and lead to rejection.
Borrowing money from friends and family for the down payment
For you to qualify for a specific home loan, you need to pay a certain percentage as down payment. Furthermore, you also need to have reserves for a number of months to show the lenders that you can pay the mortgage. If you cannot come up with the amount, there’s a chance of rejecting your application. Borrowing from friends and families could also disqualify you, as you will be asked to document that money.
These are some of the factors that could get your mortgage application denied. Before applying for any mortgage sandy, talk to a trusted mortgage broker to find out if you are eligible for a home loan. If you’ve been rejected, you can talk to a different lender.