Before offering you a mortgage loan, lender checks your creditworthiness. If the lender finds that you are a risky borrower, then he/she has all the rights to disapprove your loan request. There are some solid reasons which can weaken your loan approval chance. Here we discuss about those reasons which can make you an unattractive borrower before the lender.
1. If you have a poor credit score
Credit is key in obtaining a home loan. Your credit score reflects your credeitworthiness. Lender takes this 3-digit figure to judge the riskiness in offering you a mortgage loan. Usually, a credit score of 650 and more is required to get a mortgage offer. If your score is below that figure, lender thinks twice before making the offer.
2. If you are a self-employed
If you are self-employed, it means that you don't have a fixed regular income. Usually lenders consider the self-employed persons as relatively risky borrowers than the salaried persons. If you are a self-employed person, you have to provide tax returns of last 2 years while applying for a mortgage loan.
3. If you find it tough to pay the down payment
If you can pay enough down payment, you may get a better mortgage deal. Again, if you can't pay enough down payment, then you are treated as a risky borrower by the lender. In that case, you can opt for FHA loans where the down payment requirement is only 3.5%. But, here you have to pay the mortgage insurance premiums. For conventional loans, down payment requirement is much higher.
4. If you don't make enough money
If you apply for a conventional mortgage and your debt to income ratio is more than 36%, then the lenders do not usually approve your loan request. Debt to income ratio is the percentage of your gross monthly income that goes towards payments of various types of debts. To obtain a conventional loan offer, this ratio should not exceed 36%.
5. If you have made big purchases recently
If you are planning to purchase a house in the, say next year, you it would be wise not to make any big purchase in between. This may put financial pressure upon you which in turn may hamper your chances of getting a mortgage loan. Moreover, don't take out a loan or use credit cards to make the big purchase. This may hurt your credit score.
6. If you are burdened with too much debts
If you are saddled with too mush debts such as credit car debts, car lease payments or student loans, your chances of getting a home loan are negatively affected. Before applying for a loan, make sure that you don't have much debt burdens. Again, if you are getting child support or alimony, don't forget to reveal that to the lender. This works in your favor in getting the loan approval.
These are the things that go against you in getting a loan. Take note of these things before applying for a loan.