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Reasons Why Your Mortgage Application Won’t Go Through - Dollar Stretcher Guest Blogger
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Reasons Why Your Mortgage Application Won’t Go Through

by Kalen Smith

Applying for a mortgage can be overwhelming. The reason it can be such a stressful ordeal is because you don’t know if your loan will be approved or not. There are a number of things you need to take into consideration before you apply for a mortgage:

  1. You have problems with your income or credit. Lenders want to make sure you have the capability to pay in the future. Your income tells them whether you have the capability to pay. Your past history of paying your bills on time also tells lenders whether or not you are a credit risk.

  2. You are involved in a lawsuit. Whether you are defendant or plaintiff in a lawsuit, lenders will likely see you as a risk. If you’re being sued, you may have to pay a large settlement to the plaintiff. If you are the plaintiff to a lawsuit on the other hand, your legal bills can burn through your savings. Lenders are likely to decline your application until your lawsuit has been settled.

  3. The house is appraised at a low rate. When you buy a house, you will need to have it appraised. Lenders will want to know how much your house is being appraised for. If it isn’t being appraised high enough, they will instantly decline the loan. They want to make sure that you can come up with cash immediately if you run into financial problems. Obviously, the only way most people would be able to do that would be to sell the home. If the house can’t be sold for enough to cover the loan, the lender would have to take a loss after foreclosure.

  4. You are getting a divorce. Lenders may be a little nervous if you are getting a divorce. They won’t necessarily disqualify you, but they are likely to scrutinize you. The lender knows that they will be stuck in the middle of a fight for property, which includes the house. A divorce will also alert the lender that your income could change. If one spouse receives the house but has to pay monthly child support or alimony, that may affect their ability to pay their mortgage.

  5. You just changed jobs. Employers want to make sure you have a stable employment history. As a rule of thumb, they would like to see you in the same job for at least a couple of years. Although that is a general rule, they may get nervous if your income suddenly changes.

Applying for a mortgage is obviously scary. There are a number of reasons why your application can be declined. It is important to understand what those reasons are. That way, you will have a better idea of when to apply for a loan. If you fall into any of the categories above, you may want to wait until your situation is more stable. Loans can take a long time to process. You don’t want to have to wait to resubmit an application and go through it all over again if your loan has been declined.

Kalen Smith writes about financial affairs and budgeting at MoneyFile.net, a personal finance blog in the saving and financial advice sector. Kalen also writes about credit cards, investing, mis-sold mortgages, unfair loan agreements and credit rating advice.

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