Home Loan Denied? Why Is That?

HOME LOAN DENIED? WHY IS THAT?  Apparently you are not ALONE!

Recent economic reports state that "incomplete loan applications" and appraisals coming in too low are causing record level loan denials!  Appraisals you and I can't do much about, however, a Home Loan Denied because of being an incomplete loan application is something we can control. 

How do you turn a Home Loan Denied to Loan Approved? Today, we have less home loan products available to offer consumers, and these products have specific qualifying guidelines you must meet in order to obtain a loan. When you know what the qualifying guidelines are in advance, your chances of getting Approved are guaranteed plus will save you time and money! 

Most consumers don't just wake up  in the morning and decide today's the day  they want to go out and buy a home, jump in the car and head to the local bank and come out with a loan. Of course, there are some consumers that don't need much loan prep time to take action on buying a home. These consumers  are either cash buyers and/ or, living with family or on a month to month rental agreement, have two or more years on the same job or line of work, have some savings and have  great credit. But if that's not your situation; most of you will need to start your "home buying" plan 6 to 12 months in advance.  This process can be called the Pre-Qualification phase. Here your credit report is reviewed, along with your asset and income documentation. If any or all of these areas have problems, this is the time to learn what you need to do to improve each piece.

Below are some examples that could delay your ability to be approved for financing immediately , however with the right strategies and plan in place, may very well save you time and get you ready for a loan appoval sooner. When you don't know what to do or how to fix it, this unfortunately, can make you be waiting a very long time to buy a home.

• Any Foreclosure/Bankruptcy: Typically FHA, VA and USDA (Zero Down) will require 3 years after a Foreclosure or BK before you can be approved for a new home loan. Conventional financing is betweeen 4-7 years. You need to start immediately after a Foreclosure, Short sale or BK to re-establish new revolving credit card accounts. Revolving credit cards with on time payments and low balances are the fastest way to boost your credit scores. Set a goal to have a minimum of two-three revolving credit cards.  Secured credit cards are a great option for obtaining new credit. This is a must if you do not have any positive credit trade lines reporting on your credit report. Google  Secured credit cards for bad credit and a number of companies will come up. I like Capital Bank because there is no credit check, anyone can get one as long as they have a bank account. Secured credit cards are scored the same as a traditional major credit card.
  
• Large Collections, Chargeoffs or Judgements - Most lenders will require amounts above $2000 to be paid prior to closing or at the time of closing on a new loan. Will you have enough money saved to pay off these charges, and still have enough for your down payment and closings costs?  If not, than you need a budget. (I would always check with your loan officer before paying any Collection, Chargeoffs, or Judgements as the payoff timing is critical, plus incorporating a strategy to payoff any one of these with a deletion off your credit report is huge for improving your credit.)  You would be smart to consider working with a professional credit repair company to get the best results for reducing the amounts and/or deleting these accounts from your credit all together.
  
• Credit scores below 620 typically will prevent you from getting a loan. Although FHA will go below 620, there are usually late pays in the last 12 months, or minimum to none positive revolving credit card activity reporting to your credit report and that is what will cause your loan application to be denied. Again that is a pretty easy fix once you open up a couple new Secured Credit cards and use them sparingly for the next 6-12 months to rebuild your credit. But get one 30 day late payment during this period and your loan will be denied. Mortgage companies need to know that you can manage your debt and pay your bills every month on time. If you have more than one 30 day late payment or new collection in the last 12 months you will be denied.
  
• You are Self Employed or a "Contract" employee. This type of employment requires two years tax returns.  FYI....your tax return income, less expenses are averaged for 24 months. So if you want to buy a home, you may want to go light on writing off every expense in the world on your tax return as this will reduce the income you will need to qualify for your new home.
  
• No Money Saved!  Yes, we have ZERO Down loans, but buying a home is more than your down payment and monthly mortgage payment. You will have additional maintenance items, i.e. roof repair, general home repair, like painting, plumbing, yard work, that all costs money. If you are barely scraping by with your rent payment, than owning a home is probably not a good idea until you have some savings beyond the down payment if required.  Mortgage lenders like to see a minimum of two months extra house payments left in the bank after closing. That way if you lose your job or some repair comes up (need a new water heater.....it's an easy $800-$1000 pop) you have the ability to continue to make your mortgage payment or make the repair without charging on a credit card. Making a Budget that includes  monthly savings is important to successful homeownership..
  

I understand how upsetting it is to have your Home Loan denied,  however, by contacting a Loan Officer well in advance of your time frame for buying you can avoid wasting your time, unnecessary stress and disappointment. Look for a seasoned, professional Loan Officer that will develop a customized road map to help you successfully purchase a home sooner than later. If a Loan Officer, for example sees that you have have bad credit, and tells you this will just take time and check back in another year with no action steps for you to take, you need a new Loan Officer.  For example, in my mortgage practice, I offer all my clients that can't get  approved for a mortgage today, free enrollment in to  my "Get-Ready Mortgage" program. This program provides a clear, step-by-step road map of what actions you need to take to improve your finances, employment and credit situation in order to be approved for a home loan. Having a plan similar to this should easily guarantee you success with buying a new home.  You can do this!!