THE LENDER'S EYE VIEW
Before you apply for a mortgage, knowing how to avoid potential pitfalls is invaluable. The Mortgage Bankers Association has put together a list of the most common reasons for a mortgage application to be rejected.
If the appraisal comes in low, the lender can't approve a mortgage. If the appraiser says that the house is worth
less than you're paying, you can walk away from the deal, or try to get the seller to lower the price. You can
also pay more cash, and reduce the amount of the mortgage.
Some buyers don't have enough money for a low down payment. Lenders look over your accounts carefully to determine
that you have enough cash on hand to cover the down payment as well as related costs.
Generally, a buyer's total debt payments should not exceed 36 percent of the gross income. With good credit and
a history of carrying increased debt with no problems, the lender might reconsider.
A buyer with too many debts makes a lender nervous. Too many credit cards and increasing balances can wreck your
chances of getting a mortgage. Pay off as much credit debt as possible before applying for a mortgage.
A bad credit history is sure to get you turned down. Get a copy of your credit history before you apply for a mortgage.
If there are problems, improve your credit for at least a year before applying.
Buyers with no credit history can also have a difficult time getting approved for a mortgage. Sometimes, presenting
the lender with copies of utility bills and rent payment can establish your ability to pay on time.