Over the years, home loans have become much easier to obtain than they used to be. However, there are still some circumstances under which you can be rejected for a loan, especially if you apply with your bank directly and don’t use any mortgage brokers or financial advisors to help you through the process. If you find yourself in this situation and you don’t understand why your application was rejected, here are the top five reasons why that may have happened.
1) Poor Credit
Not only can poor credit history make it more difficult to get a home loan, but many banks will use your score in determining how much you’ll be charged for rates and fees. If you’re looking to buy a house soon, paying down outstanding debts and improving your credit rating can help increase your chances of approval.
2) Not Enough Cash Flow
One of the most common reasons why you may be rejected for a home loan application is that you don’t have enough cash flow to afford it. If your household income isn’t high enough, lenders won’t give you enough money to make up for it. Not having an emergency fund is also a cause of rejection. Showing lenders that you can pay off your mortgage without selling your house or moving will ensure that they approve your application.
3) Low Income
If your income isn’t sufficient, you may be refused a home loan. Most lenders won’t give you a mortgage if your gross monthly income is below $3,000. Low savings: If you haven’t saved enough for a down payment and closing costs, banks won’t let you take out a home loan.
4) Underestimated Expenses
It’s not uncommon for homebuyers to think they can purchase a home without factoring in all expenses. While it’s true that closing costs make up a major portion of your overall expenses, there are other associated costs that can make or break your decision to buy. To ensure you’re getting accurate information, ask your mortgage lender about their estimates and talk with real estate agents about how much they typically pay in fees on each transaction.
5) Unsafe Workplace
Home loan rejection is a complicated process and many things can go wrong that can cause you to be rejected for your home loan. Some of these reasons may seem like common sense but there are some definite red flags when it comes to your application that might cause your home loan lender to reject you. Here are 5 reasons why you may be rejected for your home loan application.
While there are many reasons why you may be rejected for a home loan, in today’s market, some of them can be avoided by knowing your score and being aware of what lenders are looking for when they assess your application.