You’ll have a Hard Time Getting a Mortgage If…
Home buyers are now usually caught in a crunch. The price of property is increasing and so do rents. Still, many people prefer owning a property than giving out money for rent. If you are also planning to own a house then scrape up the money, make the down payment and buy a house of your own. But there is a catch; first, you must get a mortgage! For some, it could be a hard time getting a mortgage.
Many people consider the mortgage loan approval process pretty straightforward but oftentimes, you have to remove some roadblocks that keep you from getting a mortgage. As per Bankrate.com, almost 30% of the mortgage applications are usually denied.
So what makes it hard getting a mortgage? Let’s find out!
Hard Time Getting a Mortgage – Low Appraisal/High Price
One of the major factors that often tank several house loans is when the property’s appraised value doesn’t match with the asking price. For instance, if loan is for $300,000 to purchase a house, the bank won’t agree to it when the appraiser returns and tells them that the house only worth $250,000.
It’s perfectly fine to convince the seller to drop the price but it is also better to find a new lender who would use a different appraiser. The estimation of one appraiser may vary a bit from the previous one.
Hard Time Getting a Mortgage – Too Many Applications and Inquiries
Most homeowners are often tempted to tweak the debt-to-income ratio by refinancing an existing loan or even by applying for some non-interest credit card. Again, it is common practice but it is absolutely the WRONG time to make such a move when you are about to apply for a mortgage. This is because the mortgage officer will review your application and it is not a good impression to find a lot of recent credit requests.
For some reason, this gives out the impression of a less-than-stable loan prospect. Not to mention, all of these applications will lower the FICO score, temporarily, by almost 10 points.
Hard Time Getting a Mortgage – Too Low FICO Score
This is often a misunderstood term. FICO stands for Fair Isaac Corporation. It is the company that provides software to calculate credit scores. These credit scores are then reported by different credit bureaus: TransUnion, Equifax, and Experian.
The final numbers are then crunched by lenders and they come up with some baseline level that seems good to them. Even though, in the past, borrowers having low credit scores like <640 would also get mortgage loans but this fiasco soon gave rise to a term called ‘subprime mortgage crisis’.
Now, a borrower certainly needs a pretty average score like at least 680 or 700+ to easily get a mortgage.
How to Ace the Mortgage Game
Knowing that the mortgage road is rough, nothing could be more favorable for a home buyer than to get pre-approved or pre-qualified for a loan. It is much better to handle a loan when you have all your finances well arranged ahead of time.