Why Do Lenders Deny Home Loan Applications?
It doesn’t matter if you are an Air Force officer getting ready to retire from military service and buy a house in your home of record or if you are starting a new family and need a home (or a bigger home) to move forward in.
There are things to contemplate that can help you get better prepared to successfully apply for a home loan. Think like a lender for best results--you’ll want to have that kind of perspective going into the application process when the time is right. Here is a list of reasons some lenders deny home loan applications.
Not Enough Time in the Job Market
If you haven’t been employed for more than a year total (two years is better), you risk being denied a home loan because there hasn’t been enough time to prove your income is stable and likely to continue.
Not Enough Time in Your Current Job
This does not apply to all. Instead it is most relevant for those who have made in career switch, for those who have changed incomes from traditional hourly or salary to commission, and for those who have recently started working for themselves as small business people, contractors, remote workers, etc.
You will need a solid track record in your new gig before the lender can consider your income as stable and likely to continue. Don’t plan on applying for a home loan if you haven’t been working in this capacity for more than a year. Two years is better.
Spotty Payment History
Late or missed payments, especially on housing, in the two years leading up to your loan application is not good. You should have a bare minimum of one full year of on-time payments on all financial obligations before you apply.
If you have too much debt compared to your monthly income, you may not qualify for a home loan. Are you paying more than 50% of your income every month in financial obligations? You need to get your debt ratios under control before you apply for a home loan.
Bankruptcy and Other Judgments
Any potential borrower who has a bankruptcy or other judgments on their credit history may be required to wait a minimum amount of time before they can apply for a mortgage loan. Applying too early during this time will result in loan denial.
It’s best to take a lot of time planning and preparing for your home loan. If you aren’t fully ready to apply, it may be best to keep saving and working on your financials until you are ready to apply with confidence. If you are ready to apply now, you should discuss your needs with a loan officer to learn what the best mortgage loan options are based on your financial needs and goals.
Here's the Scoop on Conventional Loans
When Do You Need a Cosigner?
Analyzing Your Debt Ratio
Do you know what's on your credit report?
Learn what your score means.