Wednesday , October 20 2021

Request for Mortgage Rejected – Mortgage Matters


Applying for a mortgage can be extremely stressful and if you are not familiar with the requirements to be eligible for a mortgage, then even more so.

It can be very discouraging if your bank refuses your mortgage application and there can be consequences if you place an offer on a home without including a condition for financing.

Even if your bank says no, there may still be options to get you into a home.

Here are some of the common reasons why you may have been rejected.

Today’s mortgage stress test is 5.25%. This means that although the contract percentage on the mortgage can be only 1.89%, you need to qualify to make higher payments at the stress test rate. All federally regulated lenders (banks) have this requirement like most credit unions and other prime mortgage lenders.

• Poor credit history. Most lenders want to see a good credit score of 680 or higher to be eligible for the best rates.

• Your income is too low to qualify for the amount of mortgage you are requesting. You need to have sufficient declared income to pay not only your mortgage payment but also property taxes, heating costs and all other monthly expenses like food, transportation, etc.

• Your deposit is too low. For properties under $ 500,000, the required down payment is 5% of the purchase price. For properties over $ 1 million, the required down payment is 20% of the purchase price. The minimum deposit required for homes between $ 500,000 and $ 1 million the required down payment is 5% of the initial $ 500,000, and 10% of the value above $ 500,000.

• History of Employed Salaries – Guaranteed income will have a much better chance of being approved than someone who is self-employed, especially if the company was recently established. If you are not currently working, an approval will be almost impossible.

• Problems with the property – Lenders approve not only you but also the property. If problems such as structural damage, mold, etc. Existing, the repairs can be expensive. This type of property will not meet the requirements of many lenders.

• The value of the property is underestimated and does not support your mortgage application. This may require a higher down payment to complete a purchase or in the case of a mortgage refinancing there may not be enough equity in the property as the maximum available amount is 80% of the appraised value.

As a mortgage broker, I might be able to guide you so that you are in a position to have a stronger mortgage application. We may look to credit repair to improve your credit score as a plan to pay off some debts. Evaluate the type of property you are considering and set a realistic budget so that you can hunt with confidence. Come up with a savings plan to increase your deposit. There are also alternative lender options available for those who are newly self-employed.

A pre-approval of a mortgage for house hunting can also prevent disappointment.

Please call me about possible options if your mortgage application is denied and we can sort out a plan.

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