Mortgage Loan Rejection Causes & Solutions
Mortgage loans are one of the quick and easy loan processes for getting a financial help during the time of need. These are secured loans and thus, are considered an easy and very reliable loan process to get instant financial help from the lenders. But, there are some of the reasons for which you may see the mortgage loan application being declined.
Getting an application declined for mortgage loans can make you disappointed, considering the anticipations and urgent needs. But, still understanding the facts and reasons, on why a loan application get declined can help you in getting prepared in future applications for your mortgage loans. It allows you to pinpoint and strengthen those areas, where you may lack presently and needs an improvement. Even, if you are denied for your mortgage loans this time, you can apply again for it in the future and succeed.
A. Poor Credit History
Credit history plays a great role in all loan approvals. Your credit history tells everything. Your credit history is the first thing, which a bank checks, when you apply for any loan including mortgage loans. Your credit history is a way to understand how risky you are in terms of an investment. All details like credit score, monthly income including foreclosure and bankruptcy are checked by the banks. However, in terms of mortgage loans, you will not be declined mortgage loan unless your credit score is too bad.
B. Wrong Credit Report
There are several instances, when people often complain of bad credit report, even when they have done nothing wrong and should have a good credit record. While, sometimes, it may be a mistake by the CIBIL or your creditors while furnishing your details. Sometimes there is a also a case of identity theft. Thus, pre-plan your loan application and get credit report. Check it and in case, you are assured with your good credibility, complain about the same to CIBIL. Get the matter sorted out and then apply for the Mortgage loan.
C. Insufficient Income or Asset Documentation
The income to debt ratio is one of the factors, which plays a handy role in the approval or rejection of the loan application. The lender will tell if you are able to take a mortgage loan by looking at your income. You may consider that you are earning enough to sustain yourself and your responsibilities along with the EMI, but important factor is what your lender thinks about this. Thus, you need to furnish all documents in support of your income, which can prove you earn enough to meet all needs of life. Failing to do so can often result in the denial of loan application.
D. Down Payment
In case, your down payment is too small, it may spill beans into the minds of the lenders regarding the security of their loan amount. Therefore, one must always keep in mind, more the amount , the stronger is the case. Home buyers needs to pay off around 20% as a down payment. It works as a good indication to the banks and lenders that the trust can be backed upon.
E. Property Disputes
Sometimes, your property plays a role in the loan application rejection. Sometimes, a property’s value is too low, to back the mortgage loan amount being applied for, thus the loan application is being denied. Even, some disputes involved in the property and certain irregularities can pose a threat to the minds of the lenders, thus resulting in the declining of the loan application.
F. Inadequate Employment History
A consistent employment poses a sense of stability to the minds of everyone, either it be your lender or you. A consistent employment of around 2 years at least is what many lenders require, for approval of loan. The reason is quite simple; the lenders, what to know if you are able to hold down a job long in order to clear off the debts. Thus, it is advised to furnish all details of your job to the lenders in order to meet all necessary requirements of the banks before approving your application for loans. Try to back up all your previous employment with the relevant documents and furnish as many documents as you can which imbibes positivity in the minds of the bankers.
G. Additional Debts
Among several other available reasons, one reason can be additional debts of yours. You must keep in mind, that your loan application can even get disapproved after it is approved and thus, it is recommended not to increase your debts and keep all your expenses within a limit.
H. Incomplete Application
Mortgage lenders are busy people and thus they don’t have any time in personally getting every missing detail. They are professionals and thus, they may deny your entire request in case, you missed any required and compulsory field in your mortgage loan application. Thus, don’t rush into the process. Complete the loan application with patience and take your time in cross checking the application and check every minute detail as furnished by you before submitting your application.
I. Inexperienced loan officer
One of the surprising factors, which may be a reason for the loan application gets rejected, is the inexperienced loan officer. Thinking on this aspect, you can say, ‘What can be done in this regard?’. Even, in this case, cards are not in your hands, but still you can play a good hand, by opting for the experienced professional through your contacts and meeting the right person for your needs. Get through all available officers for this mortgage loans and try to contact the person who is best in the field.
It is not uncommon for the people being denied for Mortgage loans by the lenders. But paying attention to several minute details and requirements can help you in getting your mortgage loans application getting approved.We would like to hear from you about your own experiences or any specific query for mortgage loan.