5 Things You Can Do if You Are Denied at Pre-Approval for a Mortgage Loan

Since mortgage interest rates are relatively low, now might be the perfect time to purchase your first home. Unfortunately, the excitement of buying a home can end abruptly when a lender denies your mortgage pre-approval. A mortgage pre-approval is the best way to know whether you qualify for a home loan, and how much you can spend on a house before starting the search.

Getting denied should not discourage your efforts, although you may need more time to prepare for this large purchase. Therefore, here are five things you can do if you can’t get pre-approved for a mortgage loan.

1.  Ask for an explanation – Several factors can disqualify you for a mortgage loan, such as inadequate income, a low credit score and questionable employment.

2.  Build your bank account – Some lenders want to see a 2 to 3-month cash reserve after paying mortgage related expenses. If you will not have a cash reserve after paying closing costs and the down payment, the lender may recommend that you postpone buying a house until you’ve saved additional money.

3.  Add points to your credit score – If you are turned down for a mortgage due to a low credit score, take steps to build your credit. This can be as simple as paying all your bills on time over the next 6 to 12 months, or paying off a credit card to decrease your credit utilization ratio, which will subsequently raise your FICO score.

4.  Increase your income – There are several ways to approach this situation. You may qualify for a lesser loan amount; or if your spouse works, perhaps you can apply for a joint mortgage, at which time the lender will use your combined income to determine affordability. Too much debt may prevent a pre-approval, paying off credit cards and other loans — student loans, auto loans and personal loans — can increase purchasing power and help you qualify for the desired amount.

5.  Wait until the two-year mark – For the most part, mortgage lenders require 24 months of consecutive income. Therefore, if you’re just entering the job market, or if you were unemployed in recent months, the lender may reject your application and require that you wait at least two years before re-applying for a mortgage loan. If you carefully prepare for a purchase, you can successfully meet a lender’s qualifications and get the keys to your new home.

For complete mortgage loan program details and to find out if you qualify, contact us today at 888-488-3807 or go to www.OneTrustHomeLoans.com.