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One of the first, and most important, steps in the home buying process is getting approved for a mortgage. Not getting approved for a mortgage before shopping for homes can lead to lots of wasted time, disappointment, and heartbreak.
It doesn’t make sense to shop for homes before knowing how expensive of a home you’re able to purchase, if able at all at the present time. Most people won’t go look at BMW’s when their monthly budget for a car payment is $250.00, it just doesn’t make sense!
One of the most common home buying FAQs comes from buyers who can’t get a mortgage at the present time. They’re often confused as to why! Well, there are actually some very common reasons why potential home buyers can’t get a mortgage.
In this article we’re going to discuss the 5 most common reasons why a buyer is unable to qualify for a mortgage. It’s important for buyers who’re unable to get a mortgage to understand the reason(s) why so they can work on overcoming the reason(s).
One of the major factors of getting approved for a mortgage is a buyers credit score. The type of mortgage product and the mortgage lenders guidelines will determine what a buyers credit score needs to be.
One of the biggest reasons potential buyers can’t get a mortgage is because of low credit scores. A buyers credit score will determine not only the chances a buyer can get approved for a mortgage but also can impact the interest rate and amount of mortgage insurance that is required.
For example, one of the benefits of FHA home loans is that they allow for lower credit scores than a conventional mortgage product. Depending on the lender, buyers with scores of around 620 can get approved for an FHA loan.
The bad news is that low credit scores can be the reason a buyer can’t get a mortgage. The good news is that low credit scores can be improved by taking the proper steps.
There are dozens of tips for improving a credit score that you should be aware of if your credit score is too low to get a mortgage. If you’re unable to get a mortgage because of a low credit score, it doesn’t mean that you’ll never be able to do so!
The next reason why buyers are unable to get approved for a mortgage is because they lack employment history or their employment history isn’t consistent enough. Similar to credit score guidelines, depending on the type of mortgage a buyer is attempting to get will determine the employment history requirements.
One of the most common mortgage myths is that buyers always need to have a 2 year work history in order to get a mortgage. This isn’t always the case as there are exceptions that some lenders can make.
Generally speaking a mortgage lender will want a buyer to have solid and consistent work history. Large gaps in employment, changing fields of work, or a variation in hours worked are some of the biggest red flags for mortgage lenders and can result in a buyer being unable to get a mortgage.
There are a few mortgage products available that allow a buyer the ability to buy a home with no money down or very little. The truth is though that there are more mortgage products available for buyers who have some money available for a down payment.
A common reason why a buyer isn’t able to get a mortgage is because they don’t have enough money saved. If you’re unable to take advantage of one of the low or no down payment mortgage products, you’re going to need to have some money saved up.
If you don’t have any money saved and can’t qualify for a no money down mortgage product, it’s unlikely you’ll be able to get a mortgage at the present time. If this is the case, there are many creative ways to save for a down payment to buy a home that can help you save enough money in order to get approved for a mortgage.
It’s also possible a buyer has enough for a down payment but not enough in reserve money. Depending on the type of mortgage and the lender, it may be required for you to have reserves available after you pay for the down payment and closing expenses.
Some home buyers can’t get a mortgage because their lender requires a specified amount of money available and they simply don’t have enough saved!
A very important factor that’s taken into consideration when a buyer is attempting to qualify for a mortgage is their debt-to-income ratio. Each type of mortgage has different guidelines for the amount of monthly debt they allow a buyer to carry,.
Another reason why a buyer can’t get a mortgage is because they have too much debt. Buyers having too much debt is one of the worst mortgage mistakes and you need to be aware of all your debts.
If you’re unable to get a mortgage because you have too much debt, the great news is that this is one of the easier things to fix. It’s always recommended that as you’re preparing to get a home loan you don’t take on any additional debt if possible.
If you absolutely need to incur additional debts, it’s suggested that you discuss with a mortgage professional beforehand so that it isn’t the reason you can’t get a mortgage.
A buyers income plays a huge role in whether or not they’re able to get a mortgage. Mortgage lenders love borrowers who have stable, consistent, and traceable income.
Another common reason why a buyer is unable to get a home loan is because they have complex, confusing, or unreliable income sources. This is a very common reason why self employed home buyers can’t get a mortgage.
If you’re unable to get a mortgage because your income is not consistent or traceable, you should get advice from a mortgage lender or broker on the steps to take next. It’s possible that a simple letter of explanation from an employer can suffice for complex or confusing income.
If you’re unable to get a mortgage at the present time, it doesn’t mean you’ll never be able to get a mortgage! There are some important steps to take after being denied for a mortgage.
Below are some of the most important tips to help you get a mortgage in the future.
If you’re buying a home in Rochester and are unable to get a mortgage, you need to know the reason why! The above 5 reasons why home buyers can’t qualify for a mortgage are the most common, but definitely not all of them. It’s vital you’re working with a top mortgage company in Rochester so that you’re given fantastic advice. If you’re looking for a quality mortgage lender in Rochester, contact me and I’d be happy to connect you with one!
About the authors: The above article “Why Can’t I Get A Mortgage? 5 Reasons Home Buyers Can’t Qualify” was written by Kyle Hiscock of the Hiscock Sold Team at RE/MAX Realty Group. With over 35 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
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