Buying your very first house is a milestone that everyone dreams of achieving, as it’s the ultimate manifestation of independence and financial stability. It’s also a complex process that involves many things, such as house hunting, an appraisal, and applying for a mortgage. However, sometimes things don’t go as expected, and your lender may deny your mortgage loan, even when you were pre-approved.
Even when you have a low debt-to-income ratio, a high credit score, and a stable income, you may still risk getting rejected if you have even just one delinquency on your credit report. Some lenders and financial institutions can be ruthless, making it even more challenging to find a home. The good news is that you don’t have to fret just yet; you can still apply for a conventional home loan and get approved. Here’s what you need to know:
Ask Why Your Application Was Denied
Thanks to the Equal Credit Opportunity Act, your lender must give you a specific reason for denying your loan application within 60 days. Knowing this reason will provide you with valuable insight into what you’ll need to change the next time you apply for a loan. Common reasons for a loan rejection include a few flags in your credit history, a high debt-to-income ratio, and a down payment that’s too small.
Improve Your Chances of Getting Approved
If your credit report had information that caused the lender to deny your application, you could ask for a free copy to ensure that the report is accurate. You can also use AnnualCreditReport.com to get a free copy of your credit report every week until April 2021. Be sure to analyze it thoroughly so you can dispute any errors or outdated information.
Meanwhile, if the reason for your denial was an insufficient credit history, then you can take a few steps to create a more robust credit profile. Paying your rent and utilities on time and getting a credit card are the best ways to do this.
Getting a mortgage during COVID-19 is also notoriously more challenging because of economic uncertainty and general financial constraints, so many lenders have tightened up their credit score and conventional home loan requirements. However, you can improve your credit by paying your bills on time and paying more than the minimum payment throughout the month. You can also keep your credit card balances low. It’s best to avoid applying for multiple credit accounts at the same time as well.
Another aspect to look into is lowering your debt-to-income ratio (DTI), which lenders will use to assess your ability to pay the loan. opt for a DTI of 36 percent or less, which will improve your chances of getting approved.
Reapply with Another Lender
You can also consider applying with another lender, as they have different underwriting standards and guidelines, making it easier to get approved. Applying with several lenders within a month will also limit the impact on your credit score. While undergoing another conventional home loan process can be tiring, getting approved is ultimately worth it.
Desert Springs Mortgage: Your Phoenix Mortgage Broker
Mortgages can be tricky to navigate but working with a reputable Phoenix mortgage broker can help you find the best rates while improving your overall application. If you get rejected, don’t worry—there are many lenders out there that are willing to help make your dream of homeownership come true!
Are you looking to minimize the chances of a rejected mortgage application? Seek assistance from Desert Springs Mortgage, your reliable Phoenix mortgage broker. We are here to help you connect with the ideal loan provider, no matter your financial situation. Contact us at (623) 432-1309 to learn how we can help you.