If you were denied a mortgage loan, know the reasons so you can work on the problems to get approved next time. There are many reasons why one might be rejected for a mortgage loan. If this happens to you, talk with a licensed mortgage broker about what went wrong and how to proceed next time because some of these issues can be resolved without too much trouble!
These are the top five reasons why someone would be declined a mortgage.
Recurring late payments
The first is that you may have had a low credit score. It is usually reflected on your credit report from Equifax or TransUnion if you have multiple late payments, which may be indicative of financial difficulties. If you’ve had trouble paying your bills in the past, you should try to improve your credit before applying for a mortgage loan.
Unemployment or change in employment
The second reason is that you are no longer employed or recently changed your job. Most institutional mortgage lenders will not approve you if your employment has stopped. If you’ve changed jobs recently, you may be able to qualify for a mortgage if you can prove a steady income and sufficient employment history.
If you’ve worked for a certain industry for the past two years, lenders are more willing to qualify your mortgage financing. So, if you are considering switching your job before applying for a mortgage loan, consider the potential fallout. The best way to figure out if it’s detrimental to your qualification is to ask a mortgage broker near you for advice.
Bruised credit
If your credit score is too low, you may have applied for an alternative lender mortgage. These loans have higher interest rates than conforming loans but they are more flexible in their lending guidelines for applicants with bruised credit. You can access these lenders through a licensed mortgage broker in your area, and ask for institutional alternative lenders.
No credit history
A credit check is typically part of a mortgage application, and it’s important that you have good credit. However, if you’re a buyer without an established Canadian credit history, you may be better off with a co-signer. A co-signer with good credit will help you qualify for a mortgage loan. You and your co-signer will both be responsible for the mortgage nonetheless.
High debt-to-income ratio
If you’ve been turned down for a mortgage loan, even though you have an Excellent credit score and clean credit history. You’ve probably exceeded the debt-to-income lending ratio set by the lender’s lending guidelines. Your credit score is an important factor, so you’ll need to keep that score high but the debt-to-income ratio is also another important factor.
A high debt-to-income ratio is a forecast to the potentially difficult financial situation that can cause you to go into mortgage default if you were approved for a mortgage. For this reason, lenders will decline your application unless you can show more verifiable income and/or reduce your outstanding debt amount.
Different lenders have different lending requirements, so it is best to explore other institutional lenders who may qualify you for a mortgage loan.
Frequently asked questions about why you were declined for a mortgage loan
Is it common to be denied a mortgage?
It is not uncommon to be denied a mortgage, and it is also common to try again with different lenders. Sometimes you can get qualified when you apply to a different lender, such as an alternative lender.
Getting a mortgage can be one of the most stressful, complex, and time-consuming parts of the home buying process. While the lender’s job is to ensure that you can afford the mortgage, a mortgage broker’s job is to make sure you apply to lenders who are suitable for your financial situation. Therefore, improving your chance of being approved instead of declined for a mortgage.
This is why it is best to know the requirements for qualifying for a mortgage before going to the bank and applying by working with a licensed mortgage broker.
What are red flags for underwriters?
The mortgage underwriter will look at many different factors when deciding whether or not someone gets a home loan. Some of these factors will vary by the type of loan while others will remain the same.
Red flags that may make a home loan underwriter reject an application include recurring late payments, a high debt-to-income ratio, and a history of bankruptcies in the past seven years.
When you work with a mortgage broker, you get the assurance that these red flags are addressed before you submit your mortgage application. Therefore, improving your chance of getting approved for a mortgage.
Work with Matrix Mortgage Global
Matrix Mortgage Global (Lic. #11108) has access to over 100 different lenders. You have access to a wide range of lending partners who are ready to offer you various mortgage solutions, including mortgage renewals, refinancing, second mortgages, home equity loans, bridge loans, and other specialized mortgage products.
Jermaine Hinds, Mortgage Broker Offers Personalized Solutions for Home Buyers and Homeowners
Jermaine Hinds, Mortgage Broker believes in delivering results to clients with their best rate and solutions possible. He has built his reputation around helping people and getting them mortgage financing that fits their situations for the long term. The collective knowledge and experience from Jermaine and his team will help you achieve generational wealth through real estate.
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Jermaine Hinds - Mortgage Broker | Matrix Mortgage Global
