Picture this you save up money for years, you worked on your credit score twice as long and your mortgage application gets denied. How is this possible? Sadly, many homebuyers get denied all the time.
According to a recent study done by Federal Reserve one out of every eight home loans, applicants will be denied for one reason or another. The downside of it all is most cases could have been easily approved if applicants could have known certain things to change or not do. So, before your application gets denied to make sure to go over these four steps that Property Records provided.
#1 – Your Credit Card History is Limited
Some folks might see credit card debt as something that needs to be avoided at all costs but in the real estate world, credit history is something to show that you’ve been paying off your debts.
Other folks might think poor credit is bad and it will affect the mortgage application but poor credit is better than no credit. Most lenders will avoid people with no credit history because of their like ghosts with no history. These types of people are known as ‘credit invisible’, which means they’re ghost on file with the three major credit companies like TransUnion, Experian, and Equifax.
If you’re one of these credit invisible people there is still hope for you. There are some lenders that will use other documents like utility bills, cellphone bills, rent money orders, car payments to assess your creditworthiness.
#2 – You Have Brand New Credit Cards
Recently opened new credit cards are not a good sign. The new credit card may fluctuate your credit score and that’s not a good sign for lenders.
Your application has a higher chance of being denied because of your recently opened Best Buy card. The lesson here is not to open new credit cards when you’re about to apply for a mortgage. A lender will deny your application if they suspect something is fishy.
#3 – Unpaid Medical Bills
Unpaid hospital bills that went into collections are a big red flag for lenders. Lenders see it as if the person applying doesn’t even pay for his or her medical bills why is he or her going to pay the mortgage.
If you’re one of the people with old medical bills that are delinquent you definitely should pay them off in full or set up a payment plan to pay it off monthly. Showing that you’re working on paying off your medical bills will strengthen your application.
#4 – You Have a New Job
You scored a higher paying job, what’s the problem with that? The problem is that mortgage lenders want to see consistency. The longer someone has worked in a job the better, this way mortgage lenders know that you have steady income coming in every pay period.
We can’t predict that we had to get another job so you should wait a few months before applying for a mortgage, you don’t want to get denied.
#5 – Your Application Has Phony Information
Lying on your mortgage application will get you denied at a drop of a dime, the last thing you want to do is lie on the information you’re giving the mortgage lender. Lying on your mortgage application is so common that it’s become illegal, it’s called mortgage fraud and to make it worst it will stay on your record.