Getting rejected for a mortgage loan is upsetting especially if you are borrowing it for something important like a home loan. Therefore, before applying for one, make sure that you are qualified for it so that you do not end up being upset once your application is denied.
Here are the five main reasons why your application may be denied:
1. Poor Credit Rating and History
It is important that you go through your credit history before applying for a loan. You need to remember that before your lender approves your loan, they will go through your credit history. If they find out that you have any unpaid dues or late payments, your application will more likely be rejected.
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2. Unemployment and Unstable Income
Unemployment and unstable income are reasons for rejected loan applications. If the lender finds out that you do not have a job and your income is not fixed, they will have doubts in lending you the amount you are borrowing because doing so will be risky. However, if you have collateral that sums up equally to the amount you are borrowing, you can use this to avail of the loan.
Therefore, if you want your loan to be approved, make sure that you include a proof of income or a certificate of employment to serves as proofs that you have sources to pay for your loan.
3. Having Outstanding Debts
If you have outstanding debts that you have not yet paid, it will be harder for you to get a loan. Your lender will ask you why you have outstanding debts and if you do not know what to answer, the result will be an upset. Lenders make sure that they deal with good borrowers and good payers. That is why you need to settle all your obligations before applying for a mortgage loan. This includes car expenses, unpaid credit card bills and other types of loans.
4. Inability to Pay Down Payment Required
Applying for a loan means that you have to pay an initial amount called a down payment. If you cannot pay for this sum, the lender will assume that you will not be able to pay for your monthly or annual obligations as well. Make sure that you can also show proof that you will be able to meet the requirements of your application.
5. Exceeding the Lending Limit
If you are applying for an FHA loan, you need to know the lending limit depending on the state you live in. If you already applied for the same loan and you already exceeded the credit limit, you application will be rejected.
Going through these five main reasons why your application may be denied is important before applying for a mortgage loan. If you think that you are not qualified because of one reason or two, ask your broker about alternatives that you can do. Collateral is one way to avail of a mortgage loan despite being in the above situations because your broker knows that they have something to get from you once you will not able to settle your dues.
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