Have you ever tried to get a mortgage loan only to get denied?
Whether you were picking out your first home, your next dream home or trying to refinance an existing mortgage loan, being denied can really put a damper on things.
Though a mortgage loan is one of the largest types of loans most people will ever get, there are always steps that you take in the interim to increase your chances of getting approved the next go round.
1. Talk with your loan officer to pinpoint the specific reason you were denied.
Knowing the specific reason(s) you were denied will help you focus your energy in those areas and improve them. As you start the improvement process, it might also be a good idea to check in with your loan officer throughout the year on your progress.
2. Improve your credit score and view your credit report annually.
They say numbers don’t lie and your credit score is typically always a factor in whether you get approved for any type of loan. You can view your credit score for free once every year. Since the scores may vary, you may even want to get your score from all three major credit report agencies: Transunion, Experian, & Equifax.
3. Pay off debt.
Lowering your existing debt frees up cash to pay on your mortgage loan plus it shows your mortgage lender that you pay your loans.
4. Keep away from making other large purchases.
When looking to get a mortgage loan, don’t tie up your money with other purchases like personal loans, credit cards, and auto loans. This is not to say that you can’t get approved for a mortgage loan if you do have debt but it definitely puts you higher on the scale of getting a mortgage loan if you’re not already weighed down by debt in other areas.
5. Increase your income.
If you do have existing debt, increasing your income can help to improve your debt to income ratio. You want your income to be a higher ratio in comparison to your debt. Your mortgage loan officer (and hopefully any other loan provider) would not want you to get approved for a loan all to be stressed out later because of the burden of higher debt hanging over your head.
6. Save some money.
Some loans like VA loans do not require a down payment but in the case where you might need to put down a percentage of the loan you’ll want to have a down payment ready (or if money is needed at closing). Check with your mortgage lender on how much (if any) you may need as a down payment.
7. Maintain consistency in employment at your job or business.
You may see the mortgage loan process as many hoops to jump through but it’s all for your benefit. Life happens and there may be a need for a career change or switching to another job, but having a track record of staying at the same job consistently shows dependability of income.
Just remember that each person’s situation is different. If you have questions on the best steps to set yourself up for success in getting approved for a mortgage loan, reach out to your mortgage lender.
Your comments and questions are welcome below as well and if you don’t have a mortgage lender, we would be happy to help you!!
Eric Almquist
Eric is a 19-year veteran of the mortgage industry who’s blessed to have remarkable client relationships. These relationships have allowed him to be recognized in the Scotsman Guide as one of the “Top 200 Loan Originators in the Country” since 2008. By leveraging his team and building clients for life, he’s fortunate enough to call myself a billion dollar producer!