Searching for your dream home that perfectly fits your budget and preferences is easier done
with a realtor but obtaining an approval for a mortgage is a bit harder especially if you have been tagged with bad credit.Many people assume that when they already have a pre-approval, all they have to do is scout for a home to purchase, do some paperwork,
prepare some money in advance then close the deal. But quite more often than not, many buyers are given a dose of reality when they find out that they cannot get the mortgage for final approval. This is even though a pre-approval was already made. For
some reasons, the lender decided to decline giving the loan a “yes.”With these, we need to know the main reasons why a loan or mortgages are sometimes not approved for some certain individuals.
1. Having additional debt that your regular income cannot compensate (even if it can, this additional debt alone is not a good indicator)
The fact is this: pre-approval is oftentimes based on your situation during the time that you are going over the pre-approval process. Thus, what the lenders are looking at during pre-approval is the amount or estimate of how much debt you currently
have. Many borrowers fail to realize that even minute changes in their credit and debt score later on can put off their pre-approval status.
If a prospect borrower buys something new, (say, a brand new car) that person’s credit status immediately changes. Hence, the borrower must avoid maxing out his/her credit card especially in the middle of a real estate transaction. Oftentimes, it’s
already too late when borrowers realize that when they go to the mortgage, pre-approval actually means nothing if you just had enough debt, making you a potential bad risk to the lender.
2. Sudden changes in loan requirements
Instances wherein the lenders change their requirements for mortgages are inevitable. For example, a lender initially had a minimum required credit score of 600, but suddenly, they decided to change it to 700.
This can be frustrating for borrowers who already have the approval especially when they discover that the initial situation or setup has changed. This would leave them with no choice but to look for another financer or lender.
3. Job changes
One of the biggest factors in a mortgage or loan approval is the borrower’s employment status. The lender has to know if he / she is capable of paying everything in long term. Hence, income, cash flow and employment history will be thoroughly checked.
If a borrower has actually changed job even after the pre-approval was already released, chances are, the actual lending may not push through. This is because the lender may not approve of the borrower’s new job or just consider it as something that
is not secure for a long term employment, etc. There are also some loans that set a minimum employment history requirements and tenure.
For buyers, especially the first timers, they should always consider these so as to avoid mortgage or loan disapproval. They need to understand the most common reasons why even pre-approved borrowers are denied in the end. Talk to a licensed realtor
who knows the ins and outs of financing.