Most people dream of owning their own home but they don’t understand the reasons your mortgage loan was declined. With the help of a mortgage loan, that dream can soon become a reality. Unfortunately, getting a UK mortgage loan application can seem overwhelming, especially with all the paperwork. Mark you, that won’t even guarantee your approval.
Although most of the financial institutions have started bending their lending standards, following the financial crisis in 2008, quite a number of people still have their mortgage loan applications denied. Here are some of the reasons why:
Poor Credit History
Credit score remains a major stumbling block for many loan applicants. Your credit history is a record of your ability to repay debts; as such, it shows whether you are a risky investment or not as it. Anyone can find information on their credit scores from credit bureaus such as Equifax, Experian, and TransUnion. If you have a bad credit score, which usually falls in the 300 to 620 range, then that’s probably why your application was denied. Lucky for you, you can always improve your credit score and try again.
Insufficient Income or Asset Documentation
A lender will require copies of your tax returns, paychecks stubs, W-2 statements, and bank statements, to prove that you have sufficient income to pay back the loan. In fact, others will even require three to six months reserves to ensure you can still make payments in the event of a financial setback. Even if you earn enough, if you can’t provide adequate documentation of your income and assets, then your application will likely get denied. Other than protecting lenders, this also protects borrowers to ensure they don’t suffer unnecessary stress due to a home loan.
What to do if your loan was denied for income or assets? If you are at retirement age 60+ you can investigate the federally insured HECM for seniors. The HECM program was designed for thos eon fixed income and have relaxed income requirements. If you fail residual income requirements you may still qualify by taking a tax and insurance set-aside, also known as a LESA.
Down Payment is Too Small
A down payment is like an investment in your future home; therefore a low one doesn’t create so much faith with your lender. Most lenders require down payments that equal 5-25% of the total home value with the FHA loan requiring as low as 3.5% down payment. If you can’t come up with that amount, chances are you’ll be rejected. The best way to solve this problem is to give yourself more time to save for down payment and don’t forget the closing costs. There are so many mortgage providers in the market and with the help of Habito, you can be sure of finding the best terms and rates.
Problems with the Property
Being denied a mortgage loan doesn’t always have to do with the homebuyer. A home loan is often based on a percentage of the appraisal value. If the home appraises significantly lower than the purchase price, chances are your application will be denied. Possible solutions to this problem include renegotiating with the seller so they can lower the property’s purchase price to the appraisal value, increasing your down payment, or shopping for another lender who can offer more funds. On another note, lenders are always trying to minimize risks. Therefore, when shopping for your dream home, consider one that isn’t too risky to lend on. Chat with your lender beforehand about the kind of homes they would consider unacceptable.
Inadequate Employment History
Consistent and adequate employment history is essential when applying for a mortgage loan. In fact, if you’ve struggled to hold onto a steady job for the last two years, your mortgage loan may be declined. Also, lenders want stability; therefore, a dramatic change of employment even after pre-approval can risk your chances of getting a mortgage loan.
Ingrid Maldine is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Ingrid’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Ingrid has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Ingrid has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.
