Tag Archives: mortgage amount

Top six reasons mortgage applications are rejected

Half of refinance applications are abandoned or rejected, as are 30 percent of purchase mortgage applications, according to the Mortgage Bankers Association. All told, the Federal Financial Institutions Examination Council (FFIEC) says that well over 2 million mortgage applications were rejected last year.

Want to avoid falling into that number? It’s tough — especially in light of the fact that mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.

Here, as a cautionary tale and primer on what to expect, are the top six reasons mortgage lenders reject applications.FFIEC

1. Income issues. Most failed applications falling into this category have income too low for the mortgage amount they are seeking; often, a spouse’s credit issues can create this problem, too, as the income the spouse plans to actually chip in toward the mortgage cannot be considered by a lender.

But increasingly, the recent vagaries of the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.

2. Muddled money matters. If the mortgage for which you’re applying plus your monthly payments on credit card, car and student loan debts will comprise more than 45 percent of your total income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income — all of these can be difficult or impossible to get a mortgage bank to consider, and if they do, they might not take all of it into account.

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you seek. More than one-third of Americans, by some numbers, have credit scores too low to qualify for a home loan. Even if your credit score is high enough to qualify, if you have any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last two years, loan qualifying could be difficult to impossible.

4. Property didn’t appraise. Since the whole industry had its hand smacked for allowing home values to skyrocket in a very short time, appraisal guidelines have tightened up — some would say, even more than overall mortgage guidelines. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.

This is especially common in the refinance realm, as well over a quarter of U.S. homes are now upside-down, meaning the mortgage balance owed is greater than the value of the home.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.

And in the world of condos and other units that belong to a homeowners association, if more than 25 percent of units are rented (rather than owner-occupied) or more than 15 percent are delinquent on their HOA dues, new applications for refinance or purchase mortgages on units in the development are likely to be rejected.

6. Technical difficulties with application. The days when lenders just took your word for it are long, long gone. Applications with incomplete or unverifiable information are doomed.

If any of these mortgage loan application glitches arise in your homebuying or refinancing process, it’s critical that you connect with your mortgage professional, be it your banker or mortgage broker, to determine what course of action to take.

In some cases, it might be as simple as buying a stove you find at Craigslist and installing it before escrow closes; but with income issues your mortgage pro will need to help you determine whether it makes sense to pay some bills down, get a co-signer, or even wait six months so your income documentation will qualify.

Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com.

Why you can’t get the lowest mortgage rates

Five reasons near-record low rates are out of reach for some

CHICAGO (MarketWatch) — Mortgage rates are near historical lows, but the rates lenders are quoting you aren’t as eye-popping as those you see in the news.

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Why is that?

First, remember that mortgage rates are moving constantly, and rate surveys are capturing rates from past points in time. For example, Freddie Mac’s weekly survey collects rate data over the course of a week. Bankrate.com’s survey collects rate data every Wednesday…By the time results are released, they’re already outdated.

There are other reasons your rate might be higher. Below are five of them.

mortgage rates1. You’re not paying points

Average rates in Freddie Mac’s survey include average discount points paid for the mortgage. But not everyone is willing to pay points.

For the week ending Oct. 27, rates on the 30-year fixed-rate mortgage averaged 4.1%, but that rate required an average 0.8 point to get it. A point is 1% of the mortgage amount, charged as prepaid interest.

Unless you’re going to live in your home for a very long time, paying points often doesn’t make sense…

2. Your borrower characteristics mean price adjustments

A credit score on the low side will prevent you from getting the lowest rates. Low levels of home equity will also mean a pricier mortgage rate.

That’s thanks to loan level price adjustments from Fannie Mae and Freddie Mac that have been making it tougher for borrowers to get the best rates for the past few years…

3. Your property type means higher rates

For condo-unit mortgages, you need a 75% loan-to-value ratio, or a 25% equity position, to get the best rates, said Christopher Randall, vice president, secondary marketing, at the Real Estate Mortgage Network, a mortgage lender.

And if your mortgage is for a vacation home or investment property, you can also expect to pay a higher rate, McBride said…

4. You don’t have recent proof of income

For the self-employed — who don’t have pay stubs as proof of recent income — the most recent tax returns are what a lender will look at before giving you a mortgage. If business has improved after your past tax return, that’s not going to be of any help as you try and get a mortgage today…

5. Your lender isn’t hurting for business

There can be a big disparity in what rates are offered from lender to lender, Findlay said. And it may have to do with how many mortgages they’ve been originating lately.

“Some that are lacking volume will tend to be more competitive,” he said. “Those that have enough volume may say we’re going to keep rates high.”

But the rate isn’t everything, Randall said. When shopping for mortgages, borrowers need to focus on comparing their monthly payments. “People are drawn to the interest rate… but you have to look deeper. Review the documentation,” Randall said.

For instance, it’s possible for someone to get an offer of a very low rate on a mortgage backed by the Federal Housing Administration — that loan also may come with a higher insurance premium, Randall said. That person may be better off taking a conventional mortgage with lower priced private mortgage insurance, even if their interest rate is a little higher, he said…

Read the article in full by going to MarketWatch.com.