If you have ever applied for a home loan and been rejected, you know how difficult it can be to determine why the loan was rejected. This is because there are many different reasons why a home loan may be rejected. There are numerous lenders currently doing business and each lender uses the lending criteria that they believe is best for their business. This means that not all lenders use the same factors in determining the rejection of a loan application and just because you have been turned down at one lender doesn’t mean that you will get turned down by all other lenders. Here are some typical reasons for a home loan request to be rejected.
Your Credit Score Is Too Low
Most lenders have a minimum credit score level for approving loans. If your credit score is not high enough for the loan request that you are making, the lender will automatically reject your loan application. Fortunately, there are several things that you can do to correct this problem. You can pay down any existing debt that you have to boost your credit score before reapplying for the loan with another lender. You may also try reducing the requested loan amount or putting a bigger down payment down on the home, which may result in a lower credit score requirement for the loan. Mortgage calculators like the one found at http://www.newcastlepermanent.com.au/ will let you see the loan amounts and interest rates for various credit scores.
Income Is Not Stable
Another reason why your home loan application may be rejected is that your income is not stable enough for the lender to assume the risk. This is especially true for individuals that are self-employed and contractors that see their income fluctuate dramatically from month to month. This occurs even if you have had a high income for the past few years, because the lender has no guarantee that you will continue to earn as much. Lenders are much more comfortable accepting the loans of people that receive a steady income from a paycheck than they are loaning to people that are self-employed.
Your Co-Applicant Has Financial Issues
Another common reason for a home loan application denial is that your co-applicant has some financial issues that you are not aware of. It would be beneficial for both you and your co-applicant to acquire a copy of your credit report before beginning to apply for home loans so that there are no unpleasant surprises that result in the rejection of your home loan. You also have a better chance of being approved for a home loan if the co-applicant is a parent instead of being a friend or a sibling.
Kevin McKee is an entrepreneur, IT guru, and personal finance leader. In addition to his writing, Kevin is the head of IT at Buildingstars, Co-Founder of Padmission, and organizer of Laravel STL. He is also the creator of www.contributetoopensource.com. When he’s not working, Kevin enjoys podcasting about movies and spending time with his wife and four children.
Thanks for this. I’ll be noting these things for sure.