Only 6 Out of 10 Qualifies for a Mortgage: Find out Why
Have you ever heard how low the rates have been and you are encouraged to apply for a mortgage but then you don’t qualify? This is unavoidable for some. A reality going on is that only 6 out of 10 that apply for loan are qualified. 4 out of 10 cannot qualify for different reasons, reasons that they didn’t even know would lead to their application’s disapproval.
There are 3 major aspects that are reviewed during an application. And within those 4 major factors lie the reasons for disapproval.
Here are the factors and the reason why one is rejected:
So, what is credit? It is basically the agreement we make whenever we borrow of some value and agreed to pay on a later date. But then, for mortgage, this is a very important factor. Most lender pull out your credit report and review it if you could actually qualify for a mortgage. So the reasons why one’s application is rejected as the credit is reviewed are:
- Your credit score is too low
What is a credit score that is too low? Too low credit score is a credit score under 620. The typical score most lenders accept is 640, some may go until 620 but only few lenders agree to that score. Way under that is not acceptable. So, if you are thinking of applying, improve your credit score first.
- Reached the Maximum Credit Limit
This means your balance has actually reached more than 30% of the allowable amount. The best thing to do about this is to increase the balance by paying something off.
- Numerous Credit Inquiries
This could actually lower down your credit score in some way, so during your application it would be good to keep from pulling out your credit history. A mortgage related check for your credit history isn’t going to affect your score, aside from that, the effect is very visible.
Debt is the amount that is owed to a person, a company or organization. So how debt affects the application? This actually reflects you’re over all capacity to pay your debts. Here are the reasons for rejection concerning your debts:
- Paid-in-full debt that is not accounted
There are debts that you must have paid fully; however, there are times that your credit doesn’t support such. So no matter if you already have zeroed it, it will still be accounted. So, if ever you have zeroed a huge debt in advance and your credit won’t support such, chances are, you can get rejected as the debt is still accounted for.
- Failed Co-signer Obligations
Have you lent your score to someone? This could actually be a problem in your application, if ever the person isn’t paying his mortgage anymore; your score would definitely suffer.
- Not Enough Income
Are you self employed and your schedule C is showing insufficient income to qualify you? This is also one of the major problems most self-employed encounters. The best way to get through this is to limit the expenses you declare to increase your income. Mostly, self employed maximize their expenses as they declare on their tax to minimize the tax they would be paying.
You can actually have a professional help you with all these before you could apply. To avoid further hassles and delays, it is good to put everything in order before your application.