In the wake of the housing market collapse, some mortgage lenders became much stricter about who received lines of credit. However, you should not fret if a lender rejects your application at first. Instead, use the chance to bolster your financial standing and try again.
According to a report from the Wall Street Journal, the nation’s ten largest lenders rejected 26.8 percent of all home loan applicants in 2010. This was a significant increase from 2009’s 23.5 percent. With these statistics in mind, get your emotions in check and follow these steps to get an approval the next time around.
Find out the reason for rejection
The best way to improve your financial situation is to find out exactly why a lender turned you down in the first place. This can happen for a number of reasons. According to MainStreet.com, some popular reasons include credit issues, divorce, job loss or poor health. Find out the exact issue and work to improve it.
Review your credit
Credit issues are by far the most common reason a lender might reject your request for a home loan. This problem usually ties back to your credit report. Request a copy from the major credit bureaus TransUnion, Equifax or Experian. Federal law allows you one free copy from each annually.
Once you obtain this document, scan it for unfair markings that could be unjustly hurting your score. These can include incorrect listings of your debt or outdated entries. If you locate any problems, you have the right to dispute them. The sooner you get them cleared up, the better.
Meanwhile, a first-time homebuyer may have the issue of having a short credit history. If this is why the lender rejected you, open up a credit card and use it regularly while paying down the debt on time. Over time, this should build your score.
Focus on your positives
Borrowers with a spotty credit history should be sure to make the positive aspects of their financial lives known to lenders. For example, if you have had long-term employment, make sure this information on available on your credit file.
Additionally, financial issues your spouse has can also make it difficult to qualify for a mortgage. If you find yourself in this position, be sure to establish the mortgage in your own name, especially if it will take years to improve the situation of your significant other. However, this means you will not be able to include their income when qualifying.
Qualifying for a home loan is a major step in your personal finances. Freedom Mortgage is here to keep you up-to-date on the latest tips and tricks of the mortgage industry whether you’re looking to improve your home value or simply make a mortgage rate comparison.
Latest posts by ChuckM (see all)
- A Millennial Guide to Buying Your First Home - January 4, 2017
- Getting to the Truth: Top Mortgage Misconceptions and Facts - December 28, 2016
- What Are the Most Common Reasons Why People Get Turned Down for Loans? - December 14, 2016