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Have You Been Denied for a Mortgage? Here Are 3 Reasons Why You’ll Want to Keep Trying

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Have You Been Denied for a Mortgage? Here Are 3 Reasons Why You'll Want to Keep TryingIf you’re in the market for a new home, you’ll most likely need a mortgage in order to afford it. But for some home buyers, getting a mortgage isn’t easy. Banks and other lenders are often hesitant to lend money to certain consumers, often for good reason.

But sometimes, lenders’ reasons for declining you aren’t entirely valid. That’s why, if you’ve been denied for a mortgage, you’ll want to keep trying to get mortgage funds. Here are three factors that can influence the likelihood of approval on the second try.

A Second Appraisal Might Change Your Circumstances

Sometimes, a mortgage lender will deny a loan because the property value of the home in question isn’t large enough to back the loan. If your mortgage lender declines you because of a poor loan-to-value ratio, getting a second appraisal could help. A lot of appraisal companies will give wildly different appraisals on the same property, with some brokers reporting valuation differences of up to $1.3 million.

Bear in mind that you cannot get two appraisals through the same lender, so if you choose to have the home appraised a second time, you’ll need to find a new lender.

Cleaning Up Your Credit Report Can Work Wonders

What’s on your credit report will have a large role in determining whether or not you get the mortgage you want. If you’ve been denied because of entries on your credit report, you’ll want to take every step possible to correct those report issues. If you’ve been more than 30 days late on a payment in the past, it will show on your credit report and affect your score – but by calling your creditor and asking them to remove the negative, you can bring your credit report back into good standing.

You’ll also want to pay off any and all past due balances as soon as possible. If you can’t pay what you owe in full, you’ll want to negotiate with your creditor to pay part of the amount. This will result in the debt showing on your credit report as “paid as agreed”, which will boost your credit score.

An Extra Down Payment May Be A Good Idea

Sometimes, a lender will decline a borrower if the borrower is asking for too much money. If you’re pursuing a mortgage worth more than 95% of the property value, you’ll probably be declined. But if you make an extra down payment, you can lower your loan amount – which may incline your lender to approve your application.

If you’ve been declined for a mortgage, don’t give up. As you can see there are steps you can take to get approved.

Understanding Mortgage Pre-Approvals and How to Avoid Being Declined for One

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Understanding Mortgage Pre-approvals and How to Avoid Being Declined for OneThe mortgage process is a long and complicated one, with a number of similar-sounding terms that can easily confuse first-time homebuyers. A pre-approval is not the same thing as a pre-qualification, and it’s important to understand everything that goes into a pre-approval. Being declined during the pre-approval process means you’ll have a hard time getting the funds you need to buy your home, so it’s important that you know what the process is going to look like before going into it.

How does a pre-approval work, and how can you make sure you won’t be declined? Here’s what you need to know.

What Is A Mortgage Pre-Approval?

A mortgage pre-approval is a step that happens somewhere near the start of the home buying process. Being pre-approved means you have a preliminary loan commitment from a mortgage lender. Pre-approval isn’t necessarily a guarantee that you’ll get a mortgage, but rather, a statement that if all goes according to plan, your lender will most likely issue a mortgage to you.

Pre-approvals can make the mortgage process shorter and easier, but they’re not legally binding. If you later find a better mortgage through another lender, you don’t have to take out a mortgage through the lender that pre-approved you.

What Do You Need To Be Pre-Approved?

In order to be pre-approved, your lender will need to evaluate your finances and your ability to pay for your mortgage. You’ll want to meet with your lender and provide them with bank and creditor documents that clearly show your income, your assets, and your debts. You can expect your lender to run a credit check on you in order to determine your employment status and verify that you’ve accurately reported your finances.

If you meet your lender’s criteria, you’ll receive a commitment letter that states what size of a mortgage your lender is willing to give you.

Red Flags: Sure Signs That You’re Destined To Be Declined

You can be declined for a mortgage pre-approval for any number of reasons. If you have a poor credit score, a high debt-to-income ratio, or a low or unstable income, you likely won’t meet the lender’s minimum borrower requirements – and you’ll be declined. To avoid being declined for a pre-approval, you’ll want to ensure you always pay your bills on time, negotiate with your creditors to pay off your debts, or boost your income.

A mortgage pre-approval can help you to narrow your home search and access a mortgage loan. That’s why it’s important to ensure you don’t get declined during the pre-approval.

3 Things That Will Absolutely Kill Your Chances for a Mortgage Approval

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3 Things That Will Absolutely Kill Your Chances for a Mortgage ApprovalIf you’re about to seek approval for a mortgage, you’ll want to ensure you have a solid credit score and clean financial records to boost your likelihood of being approved. There are certain characteristics that lenders want to see in a mortgage applicant before they agree to give a loan, and you want to prove that you’re a responsible borrower. But certain behaviors can easily tank your application and crush your home ownership dreams.

Before you seek approval, make sure your finances are in order. Avoid these three mortgage-killing habits while your lender evaluates your loan and you’ll quickly find yourself holding the keys to your new home.

Using Up Most Of Your Available Credit

It can be tempting to start buying furniture when your mortgage is about to be approved, but you’re better off waiting on the shopping trip until after you get the green light from your lender. Using a significant amount of your available credit – or applying for new credit – will impact your debt-to-income ratio and change your credit score. You might even end up getting yourself a higher interest rate or reducing your credit score to below the qualifying range – so don’t go credit-crazy until after you’re approved.

Being Late On Your Monthly Bills

Payment history makes up one third of your credit score, so you’ll want to make sure you pay all of your bills on time and in full if you’re looking for a mortgage. A single 30-day late payment on a bill can easily knock 50 to 100 points off your credit score. Even worse, some lenders require a full year of on-time payments before they’ll even consider you for a mortgage.

Co-Signing Someone Else’s Loan

Co-signing on a loan is generally risky under any circumstances, but if you’re trying to get approved for a mortgage, taking on liability for someone else’s debt will change your debt-to-income ratio. Being on the hook for a debt you don’t own makes you look like a risk to lenders – if the primary borrower on the loan you co-signed stops making payments, you’ll need to pay the loan, and that could divert your cash away from your mortgage.

Getting approved for a mortgage is a critical part of the home buying process, but too many would-be homeowners torpedo their own chances of getting a mortgage by making poor decisions.

Yes, It’s True: Mortgage Closing Costs Are Down. Here’s How You Can Take Advantage

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Yes, It's True: Mortgage Closing Costs Are Down. Here's How You Can Take AdvantageMortgage closing costs have been coming down in recent years, which is good news for buyers. But if you’re buying a home in the near future, you’ll want to ensure you’re prepared to take full advantage of these lower fees – after all, keeping more money in your pocket is always good. When you close on your mortgage, take these three steps and you’ll find that you’ll pay far less in closing fees than most buyers would.

Ask The Seller To Pay Some Of The Closing Costs

In most situations, the buyer is responsible for paying all closing costs – that’s the industry standard agreement. But just because that’s what generally happens most of the time, that doesn’t mean you need to pay all the closing costs on your new home.

Negotiate with the sellers to see if they’d be willing to cover some of the closing costs. If you want to make a deal like this, though, you’ll want to add an extra incentive for the sellers to agree to it. Tell the sellers that they can choose any closing date they wish, or offer to accept the home “as-is” rather than requesting repairs.

Use The Money You Save For An Extra Annual Payment

With lower closing costs come savings that you can either pocket or spend. One great way to leverage lower closing costs is to use the amount of money you saved with reduced closing fees as an extra mortgage payment.

Most lenders will allow you to make one extra lump sum payment per year, without penalty – and by making this extra payment every year, you’ll save on interest payments. So use the money you saved in closing costs as part of an extra payment to reduce your debt load.

Reducing your closing costs and taking advantage of the lower fees is easy if you know what you’re doing. A mortgage advisor can help you to understand what closing fees are negoitable and how you can budget for success. If you feel like now is the time to look at purchasing a new home, contact your trusted real estate advisor for details on how to get started. 

What Happens at a Mortgage Loan Closing Meeting? Let’s Take a Look

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What Happens at a Mortgage Loan Closing Meeting? Let's Take a LookSo you’ve found the perfect home, the seller has accepted your offer, and now you’re just waiting for the mortgage to close before you wrap up the sale and take possession. It’s time for the closing meeting.

But what does this meeting entail? And what do you need to prepare for it? Here’s what you need to know.

The Day Prior: Walking Through The Property

24 hours before the closing meeting, you’ll be given an opportunity to walk through the property and do a final inspection. During this inspection, you’ll be able to look for any damage that may have occurred between contract and closing, which means you can negotiate repairs with the seller.

It can be a good idea to schedule your closing date around the 20th of the month, so that if you do find any problems during the walkthrough, you can address them before you take possession.

The Closing Meeting: Title Insurance, Contracts, And More

Typically, the mortgage closing and the home sale closing happen at the same time. During your closing meeting, you’ll need to sign – and bring – a variety of documents in order to take possession of the home. You’ll want to ensure that you bring your good faith estimate, proof of homeowners insurance, contract, and inspection reports to this meeting.

You’ll also want to bring any and all documents that you sent to your bank as part of the home buying process. At this meeting, you’ll discuss the sale with the seller, the seller’s agent, the representative from the title company, the closing agent, the lender, and any attorneys that may be present. By the end of the meeting, you’ll receive a variety of documents, including a deed of trust or mortgage contract and a settlement statement.

You may also be required to sign a mortgage note, which is a note that states you intend to repay the mortgage loan. This note details the terms of your mortgage, including the amount of the loan and what action the lender is entitled to take if you miss payments.

A mortgage loan closing meeting doesn’t have to be complicated. Although there’s a lot that will happen at this meeting and there are a number of documents you’ll need to bring, a qualified mortgage advisor can guide you through the process. 

How to Give the Ultimate Christmas Gift: Paying Off a Family Member’s Mortgage

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How to Give the Ultimate Christmas Gift: Paying Off a Family Member's MortgageChristmas is just around the corner, and if you’re in a position to do it, paying off a family member’s mortgage is one of the biggest gifts you could give this holiday season. A mortgage can be a heavy burden on a young homeowner, which is why paying it off is the ultimate act of charity. But when it comes to paying for someone else’s mortgage, the process isn’t entirely straightforward.

So how do you pay off a family member’s mortgage? Here’s what you need to know.

Be Wary Of The Gift Tax

Under US law, you can provide a cash gift to someone else – entirely tax-free – as long as it doesn’t exceed the annual limit for that calendar year (for 2015, the annual limit is $14,000). If the gift amount exceeds the annual limit, you’ll need to pay tax on the difference or tap into your lifetime exclusion.

The IRS gives all citizens a unified credit/lifetime exclusion, which allows the transfer of up to $5.43 million tax-free over the course of your lifetime. If you exhaust this amount, you’ll need to pay taxes on all financial gifts you give thereafter.

Make Sure You Write A Gift Letter

If you plan on paying off a family member’s mortgage, you’ll want to include a gift letter with the payment – otherwise, the bank and the government may believe the money is a loan. A gift letter clearly states that you are giving money to a relative to assist them with a mortgage. In your gift letter, you will need to plainly state that you have no intention of ever seeking repayment and that you claim no ownership stake in the property in question.

Remember: You Don’t Get To Claim Mortgage Interest

Mortgage interest payments are usually a tax-deductible expense, if you’re the homeowner. But if you’re paying someone else’s mortgage, you’re not eligible to deduct the interest on your taxes, only the homeowner can do that. Even if you feel a personal obligation to assist the homeowner in paying the mortgage, it’s not your debt to pay – and that means you can’t claim interest on your taxes.

Paying off a relative’s mortgage is a fantastic gift that will help your relatives to get out of debt and pursue their life goals. And although it’s a fairly straightforward process, you still need to take the time and care to ensure you process the gift properly.