It is a very sorry situation if you have applied for a mortgage expecting to soon move into a new house and then you find out that the financial institution has rejected your mortgage application. All your hopes of getting into the new nest are squashed then and there. But then, this need not happen if you get educated about how these mortgage issuers work and then do exactly as they want you to. So, what are these ways?
Below are the five most popular reasons why mortgage applications get rejected – some of them even at the final stage when you are all gung-ho about moving into the new house. Avoid these five pitfalls and you will have better chances of getting your mortgage application cleared.
1. Low Credit Rating
One of the first thing the lender will do when you submit your loan application is to check your credit ratings. You credit report is easily available to lenders on request if you have submitted an application to them. They can even get your credit rating from all the three crediting bureaus. If you have had a bankruptcy or a liquidation of assets, your mortgage application might be already shot. Even things like late payments can be too bad. All kinds of loans are checked – your credit card loans, your personal loans, your business loans, etc. You might not believe it, but lending institutions could go as far as looking into your student loan repayment before deciding on whether they should give you this mortgage or not.
2. High Price of Property
Some sellers would peg a very high price on the property they are selling. This could be because of several factors like location, amenities, condition of house, etc. But the lenders might find such high prices quite unrealistic to finance for. If there's a property whose worth is just about 100,000 in the market, but someone is wishing to sell it for 500,000, then no seller would want to come forward to finance it. This is one more reason why mortgage applications fail.
3. Appraisal Value of Property is Low
This ties in with the above point, actually, but it is different. When you make a mortgage application, the lenders will send their experts to the venue to check out the property and to assess its market value. This step is called as appraisal. Many times, the mortgage application is rejected at appraisal because the value of the property is assessed to be lower than what is applied for.
4. Insufficient Funds in Bank Account
You are not going to get all the funding for the property from the mortgage. You will have to shell out 5 to 25% of the value from your own pocket. Then there are going to be a vast assortment of fees to be paid. The lenders will dig into your bank account for these fees. If you do not have the right funds ready for them, they will reject. Yes, many lenders just reject without justifying the reason, when the actual reason might be that they have looked into your bank account and made the impression that you would not be able to pay the remaining charges and property value.
5. Too Much Debt
Reeling under too much debt is never healthy, and not at all in case of a mortgage application. If you have too many loans that you are somehow juggling, the lenders would not like to burden you with another. Again, the crediting agencies can tell
Monday, November 30, 2009
We must learn from mistakes made in 2009
If we don't learn from the mistakes made in 2009, more so the mistakes made in the years feeding upto 2009, when things turn around we will be in worse shape than now.
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