Taking loans remains as the top mode of payment option for home buyers. This is very flexible for buyers to stretch their budget with a minimal down payment and monthly mortgage is within reach. All loan applications are literally accepted by the bank and other lending entities. The only problem is that not all applications are approved. There are numerous reasons we can point out as contributors why an application has been denied. Here are the top 3 reasons.
Poor credit history is one major factor. If your credit score is low, technically, your chances of getting approval are slim. A minimum credit score of 650 is required. This determines if you can be trusted with a loan. It summarizes your financial capabilities. It consists of your payment history, amounts owed, length of credit history, types of credits used, and your new credits. If you want to have high FICO score, establish a good track record of payments. It is also not advisable to apply for multiple loans such as applying for mortgage loans at the same time applying for a car loan. Get one loan at a time. Prioritize a house loan so that you can have a garage where you park your car.
Another reason is an unstable income. Your overall income is scrutinized and evaluated. Usually, self-employed people are affected with this factor. It is the responsibility of the lending entity to ensure that all lenders are capable of paying the loan in the duration of the contract. Variable incomes, no matter how high it may be, somehow affect a loan application negatively. The length of the period of self-employment also matters. The longer the period, the higher the possibility of getting an approval you have. Additional documents may be needed such as tax returns and financial history.
The third reason is not having a support savings. It is a huge blow for you if you apply for a loan and you do not have a single penny on your bank account. In a typical housing loan, you are asked to pay a minimal down payment. It usually varies but in most cases, it is around 3.5%. Some lenders would want to see that you have some reserves on your pocket and do not solely depend on them.
If you think you do not have those three factors, your application is way on its approval. Always remember that it is case to case basis. Some lenders do follow a certain matrix on approving loans, and some do not.
If any inquiries and assistance, you may contact us anytime. We are willing to extend our hand to you.