How to Make Sure Your Mortgage Application Isn't Rejected

Having your application accepted by a lender is the first step to buying a home.

Having your application accepted by a lender is the first step to buying a home.

It can take more than 30 nerve-wracking days to have your mortgage application approved or denied. The mortgage application is your opportunity to persuade the lender to hand over hundreds of thousands of dollars to you, a relative stranger, so you can buy a home. There is a lot at stake for the lender and the borrower. Knowing what information your lender is looking for can improve your chances of being approved the first time around.

Go online and get a free credit report from each of the three credit reporting services, Experian, Equifax and Trans Union. Your lender will look at your credit history and your credit score to help determine your creditworthiness. Lenders consider the number of credit cards and other loans you have, the age of each credit card or loan, the outstanding balances and your payment history. Lenders will also look for any deficiency judgements, accounts that have been charged off or if you have ever filed for bankruptcy.

Being employed at the same job for less than one year will make the approval process more difficult. Lenders look at your job history as a measure of income stability and evidence that you are able to make your monthly mortgage payments. They want you to be at the same job from one to three years. Be prepared to explain any gaps in your employment history and have a good reason for switching jobs, such as a promotion or better pay. You may want to hold off applying for a mortgage loan until you have been at your job for at least one year.

Put a loan amount on your application that fits your income. Put simply, if you do not make enough money, you will not get the loan. Most lenders want your mortgage payment to be at or under 28 to 30 percent of your monthly income. An exception would be if you were purchasing a home exceeding your income but paying a large down payment that would keep the ratio at the 28 to 30 percent level. The lender will expect you to provide proof of income, such as prior income tax returns or W-2 statements, to verify your income.

Tip

  • Get pre-approved for a mortgage so you know in advance how much you can spend on your house.

Warning

  • Beware of predatory lenders who will change you higher than normal interest rates and fees.
 

About the Author

Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.

Photo Credits

  • Comstock/Comstock/Getty Images