{"id":116680,"date":"2021-06-17T20:50:27","date_gmt":"2021-06-17T20:50:27","guid":{"rendered":"https:\/\/fin2me.com\/?p=116680"},"modified":"2021-06-17T20:50:27","modified_gmt":"2021-06-17T20:50:27","slug":"4-reasons-why-your-mortgage-application-could-be-rejected","status":"publish","type":"post","link":"https:\/\/fin2me.com\/economy\/4-reasons-why-your-mortgage-application-could-be-rejected\/","title":{"rendered":"4 reasons why your mortgage application could be rejected"},"content":{"rendered":"

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Check yourself if you want to ensure your loan application is approved.<\/span> (<\/span>iStock<\/span>)<\/span><\/p>\n

When the Federal Reserve lowered interest rates to near 0% last year, mortgage rates followed suit. The average 30-year fixed-rate mortgage hit 2.65% at its lowest, and the average 15-year fixed-rate mortgage bottomed out at 2.16%. At publication, the 30-year FRM sat at 2.96%, and 15-year FRMs averaged 2.30%.<\/p>\n

Despite economic uncertainty brought on by the pandemic, these low-interest rates increased enthusiasm in the housing market for potential home buyers. As more people flock to apply for mortgage loans, lenders are tightening their restrictions.<\/br><\/br><\/p>\n

SHOULD YOU CONSIDER A 15-YEAR MORTGAGE? HERE'S WHAT YOU SHOULD KNOW<\/strong><\/p>\n

Unfortunately, many potential borrowers have been or will be denied a mortgage loan. Lenders consider several factors when deciding whether to loan money to a borrower. Not only do mortgage lenders consider income, but they also look at debt, credit score, and lifestyle factors. Within such a competitive market, you'll want to make sure everything lines up if you're going to get approval. (If you want to get a sense of what preapproved rates you'd get in today's mortgage rates market, you can check out Credible's lender marketplace).<\/p>\n

There are a few primary reasons your mortgage loan application could be turned down in 2021:<\/p>\n

1. Poor credit<\/strong><\/p>\n

One key factor that lenders consider when approving or denying a home loan is credit history. Your credit score is a quick way for lenders to decide whether you represent a trustworthy buyer. The minimum credit score required to purchase a home depends on the type of loan you want. You may qualify for an FHA loan with a score as low as 500 with a 10% down payment. If you want a conventional loan, you'll need a score of between 620 and 660, and a jumbo loan requires a minimum score of 700. <\/p>\n

As lenders tighten their restrictions, borrowers who may have qualified in the past may find themselves shut out of a mortgage loan. <\/p>\n

In addition to your credit score, a lender looks at your credit report. You may not qualify for a loan if you have a history of missed or late payments, recent bankruptcy or foreclosure, or wage garnishments. In order to qualify, you'll need to work on improving your credit score.<\/p>\n

BUYING A HOME AMID THE PANDEMIC? HERE'S THE CREDIT SCORE YOU NEED<\/strong><\/p>\n

If you're worried that your credit score is too low, you can potentially improve that bad credit by using Credible's marketing partner Experian to boost your credit. You can add bills like rent and your cellphone payment to your credit score.<\/p>\n

2. New or unsteady job<\/strong><\/p>\n

Lenders want to give money to people who have the income to make their monthly payments. They look for employment history and annual or monthly income history to determine if you can afford a mortgage. Ideally, you'll have employment dating back at least two years. Lenders will want to see pay stubs and tax statements. <\/p>\n

However, if you've changed jobs recently or your work is more fluid (like freelancing), you may have to provide additional documentation to show that you can afford to make the mortgage payments. Alternatively, you could offer a larger down payment rather than a low down payment. <\/p>\n

Common ways to show income include:<\/p>\n