Have you finally found your dream home and are ready to make an offer? If so, you may be in for a shock to discover that you cannot get approved for the financing that you need. Here are some reasons that you could be denied a mortgage so that you know how to fix them as soon as possible.
Not Having A Big Enough Down Payment
There are various types of mortgages that have different down payment requirements. If you are looking into a conventional mortgage, know that many of them require a minimum of 3% of the home's value as a down payment and can increase much higher than that. An FHA loan has a requirement of 3.5%. The only type of mortgage you will find that doesn't require a down payment is a VA loan, but it does require veteran status which you may not have.
The only way around this problem is to save money. Make sure you have more than enough in your savings account for a down payment before you consider making an offer on a home.
Having Too Much Debt
A deciding factors when it comes to being approved for a mortgage is how much debt you currently have. If a mortgage lender sees that you have too much debt, they will deny you a loan for a home. The key number that they use is 43%, which is how much of your monthly income goes towards paying down debt. This encompasses all debt, such as auto loans, medical bills, and credit card payments.
If you have too much debt, you need to start getting rid of some of those debts. For example, paying off your auto loan could remove a significant amount of your income that goes towards paying off the loan. Look at the loans that you're close to paying off and try to pay them off in their entirety to reduce your debt-to-income ratio.
Not Having A Co-Signer
If you have really bad credit, the mortgage lender will require that you have a co-signer. This is the person that will essentially be responsible for repaying the loan if you cannot keep up with the monthly payments. A lot of the responsibility falls on the co-signer, since they are the ones saying that you are trustworthy to give money to for a home.
Can't find a co-signer? Your best option is to improve your credit score so that you are viewed as a more trustworthy money borrower. For more information, contact a real estate lender.