Reason #1 – Your loan officer did not know what they were doing. As silly as it may sound, just like in any industry, there are mortgage professionals who are bad at their job. Loan officers might not be familiar with or have access to all available loan products. Even worse, they might overlook usable income or assets for qualification. Despite how regulated the mortgage industry is, mortgage lenders have different licensing and training requirements based on the institution they work for.
Reason #2 – Your debt-to-income ratio is too high. This ratio is used by mortgage lenders to determine how much of a mortgage loan a borrower can carry. If this ratio is too high, there is a chance you will not qualify for any type of loan whatsoever. The best way to ensure your debt-to-income ratio is accurate is to provide income documentation to your mortgage lender and allow them to run a credit check.
Determining your qualifying income is not as easy as looking at your pay stub and taking an average. It can be even more complicated for self-employed individuals who often take advantage of tax write-offs. On the other side of the equation, it is incredibly difficult in today’s economic environment to be completely debt free. Many individuals have student loans, auto loans, medical debt, credit card debt, or other forms of debt all of which impact this ratio.
Reason #3 – You have no credit history or it has major issues. One of the quickest ways to get denied for a mortgage with most lenders is to have no FICO scores or scores below 580. Other common credit issues include recent bankruptcies, foreclosures, mortgage lates, or having a large number of numerous derogatory accounts. While it can be a lengthy process to fix your credit, savvy loan officers can help put you on the right path and guide you toward improving your scores.
Reason #4 – Circumstances have changed since your Pre-Approval. During the pre-approval process, your loan officer will help you determine what purchase price and loan amount you qualify for. Ultimately, it is up to you to not change anything during the underwriting process and inform them ahead of time if there are any changes.
The most common cliche is, “Don’t buy a car while you apply for a home loan.” Adding any sort of new debt before your loan closes will push your debt-to-income ratio up and can result in your loan being denied. The next most common cliche is “my employment changed” or “I changed my business structure”.
Reason #5 – There are property-specific issues. Occasionally, major structural issues are discovered during the escrow process. Alternatively, there may be no comparable properties making it difficult or near impossible to determine the collateral value of the property. An issue that has become more prominent in recent years is properties not appraising at the value of the contract price. While this can be frustrating, the good news is that you can generally just move on to the next property and leave those property-specific issues behind you.
If you have questions about qualifying for a home loan or recently had your loan denied by another mortgage lender, give us a call. At Bluefire Mortgage Group, we are here to answer any questions you may have about home financing. Feel free to contact us at (760)930-0569 and one of our loan advisors will be happy to assist you.