Things That Can Derail Your Home Loan

April 18, 2021

When you apply for a home loan, there are some things that can stop your loan dead in its tracks. If you are concerned about being approved for a home loan, in addition to the typical things you’ll do to prepare, add these issues to your checklist and make sure you know how to avoid them.

New Debt Since Your Loan Application

Your lender WILL check your credit reports more than once during the home loan process and if you add new debt before your home loan closes, the lender may be required to stop the loan until it is verified that you can still afford the mortgage along with the original set of debt ratio calculations but also with the new debt added to the equation. 

If your new debt causes your debt-to-income ratio to increase beyond a certain range, the loan may be cancelled. Don’t apply for new credit while you are applying for a home loan.

Major Job Changes

Borrowers who quit or lose jobs before their loans close may have the loan cancelled. Borrowers who switch from salary or hourly income to commissions during the loan process may also have problems moving the loan forward. Your loan officer is charged with making sure your mortgage loan is affordable and that your income is stable and reliable.

If the fundamental income method is determined to be stable and reliable because you’ve held it or another job like it for a minimum amount of time, starting a different type of income in the middle of the loan process won’t give the lender the minimum time on the job required to declare your income to be dependable.

Incorrect or Incomplete Application Data

Did you list that you have $20k saved up for a down payment only to have the lender discover that you only have $15K? Your loan officer will need to know where the REST of your down payment came from and whether or not it was an approved source. 

This will take time to verify and your home loan process will grind to a halt until this issue is sorted out. Such details cannot be glossed over by the lender--FHA loan rules require the lender carry out due diligence. 

Some lenders run into problems with home loan applications that are incomplete where tax information is concerned. Your lender cannot proceed without all required tax documents and if you have not filed taxes for a year required by the lender for your application package? The loan cannot move ahead without that information or an acceptable alternative.

Problems With the Appraisal 

Your appraisal is a critical part of the process. While the timing of an appraisal generally won’t force a home loan to STOP, until you get the home’s official valuation and condition, the loan must wait. And if the appraisal requires corrections for the loan to be approved, it is likely those corrections must be made before the loan can close.

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