7 Things That Often Lead to a Denied Mortgage Application

Securing a home mortgage can be a complicated and lengthy process. It involves several factors that lenders consider before approving or denying an application. One of the essential decisions lenders make is whether or not to approve a mortgage application. While many factors could lead to a loan being denied, seven key elements can have a significant impact.

 Seven Key Elements That Could Lead to a Denied Mortgage Application

1. Poor Credit History. A borrower’s credit loan history is one of the most significant factors lenders consider when assessing a home mortgage application. Lenders typically look for a good credit score based on a borrower’s payment history, debt-to-income ratio, and other financial information. Those with poor credit scores may be deemed a higher risk and, as a result, may be denied a mortgage application. It’s best to improve your credit score and diversify your history to help boost your chances.
2. Lack of Income. Lenders must determine if borrowers can afford to make their mortgage payments without a steady and reliable income. Lenders typically require borrowers to provide proof of income, such as recent pay stubs or tax documents, to verify their income. Without this information, a borrower’s application may be denied.
3. Insufficient Assets. Lenders must ensure that borrowers have enough assets to cover their mortgage payments. Borrowers should provide proof of assets, such as bank statements or investments, to show that they have the financial resources to cover the mortgage payments. If you have enough assets, it could boost your chances of being approved.
4. Unstable Employment. Your employment history is one of the lenders’ most important factors when evaluating a mortgage application. Unstable employment can be risky for lenders and lead to a denied application. Lenders will look for consistent income over a certain period, so it is essential to demonstrate that you have been employed in the same field for at least two years.
5. High Debt-to-Income RatioYour debt-to-income ratio is an essential factor for lenders. It’s calculated by dividing your monthly debt payments by your monthly income. Your debt-to-income ratio determines how much your income leads to debt payments, such as credit cards, student loans, and car loans. A high ratio indicates that you may not be able to make your mortgage payments  on time and in full.
6. Insufficient Funds for Down Payment. Down payments are a critical part of the home mortgage process, and lenders typically prefer that you have sufficient funds for a down payment before they approve your application. Lenders may only approve your application if you have enough money collected for a down payment.
7. Lack of Documentation. Lenders typically require a variety of documents to process a mortgage application. This can include tax returns, bank statements, pay stubs, and other forms of financial documentation. Lenders may only approve your application if you have the required documentation.

Ways to Increase Chances of Approval

Whether you’re applying for a loan, a job, a college, or a credit card, you can take steps to ensure your application is successful. Here are some tips to help you increase your chances of approval:

1. Make sure you have a favorable credit score.
2. Prepare for the application.
3. Read the fine print.
4. Have a good history of repayment.
5. Don’t be afraid to ask questions.

Following these tips can help you increase your chances of approval for a loan, job, college, or credit card. However, it’s important to remember that no matter how much you prepare, there’s no guarantee that your application will be approved.

Get Approved in Oak Lawn: MidAmerica Bancorp, Inc.

Applying for a mortgage can be a complex process. There are several factors that a lender considers when figuring out whether to approve or deny a mortgage application. Reviewing and addressing these factors can help you increase your chances of a successful mortgage application. MidAmerica Bancorp, Inc. is an excellent choice for first-time and returning homebuyers looking for low-down payment mortgage options. With a wide range of mortgages, we can help you spot a solution that fits your needs and budget.

Our experienced team of mortgage advisors can guide you through the entire home mortgage process and help you find the perfect mortgage in ​​Oak Lawn, Burbank, Hickory Hills, Chicago, or throughout the states of Illinois, Indiana, Florida, Michigan or Wisconsin. Contact us today for our mortgage options and start the process of becoming a homeowner.