Preventing Issues That Disqualifies You for a Mortgage

Mortgage lenders complete thorough assessments of applications when consumers apply for a mortgage. The vetting process requires the lender to establish not only that the buyer can afford the mortgage, but they must have a history of being financially stable. Preventing issues that disqualify buyers for a mortgage improves their chances of approvals.

Catastrophic Credit Scores

Applicants with catastrophic credit scores aren’t approved for a mortgage. The bare minimum for most lenders range between 580 and 620, but these credit scores generate higher-than-average interest rates. The individual would need to improve their credit scores by eliminating negative listings and any accounts in collections. Late payments reduce the credit score, too. A higher volume of debt makes the individual look financially irresponsible.

Excessive Consumer-Based Debts

Consumer-based debts are often a pitfall for anyone trying to get a mortgage. Lenders require the debt volume for all consumer-based debts such as credit cards and personal loans. If the individual has excessive balances for store cards, this could play against them if they want to buy a home. Shopping is fine, but the person’s credit scores and history should never portray them as a shopaholic with a credit card addiction. A consumer-based ratio of over 28% disqualifies the applicant for a mortgage.

Debt-to Income Ratio Issues

43% is the standard for debt-to-income ratios for conventional and FHA mortgages. But some programs require a ratio of 38% or less if the credit history includes both consumer debts and an existing mortgage. If the ratio is higher, the person will need to pay off some of their debt before getting a mortgage. Consumers see his profile here to review more details about debt ratios and how they affect the buyer’s ability to get a mortgage.

Unstable Employment History

Anyone who wants to get a mortgage must have a stable work history. In fact, most lenders require the individual to work at the same place for at least two years. Buyers with a longer work history with their current employer appear more responsible and financially responsible. All lenders verify the individual’s employment before extending a mortgage or even talking about loan amounts. The employer must complete forms that show how long the applicant has worked with them and how much the individual makes.

Having Too Little Net Income without Bonuses

Lenders want to see income records that show exactly how much the applicant makes each pay period and annually. They don’t want to see an inflated amount that includes bonuses or vacation pay. The individual must present financial statements that show their net income minus additions. The lender wants to know how much the person makes, so the lender compares the amount to the mortgage payments and insurance premiums. The buyer must have the income to afford the mortgage.

Qualifying for a mortgage requires the individual to meet the minimum credit scores and have a lower debt-to-income ratio. If the individual has excessive consumer debt, lenders may see them as financially irresponsible. Buyers can review their options by contacting a lender now.