No one wants to be rejected for a home loan. Unfortunately, it would be silly to think that every single interested homebuyer gets approved for a mortgage their first time. There are a variety of reasons why you might be turned down, but there’s always hope.
After receiving the news that a homebuyer wasn’t approved for a home loan, many don’t know where to turn. Reasonably so, many don’t prepare for the possibility of being rejected and don’t know the next steps. Here are some suggestions for what to do if you find yourself in this scenario.
Find Out Why
There are many reasons why buyers can be turned down for a home loan, with the most common being credit issues. The first step after being denied is to find out exactly why. If the mortgage company that you’ve been working with is reliable, this should be no problem. Find your declination letter, and pinpoint exactly what the cause was. Some of the most common include:
- Poor credit
- No credit history
- A lot of debt
- Not enough money for a down payment and/or closing costs
Research Other Home Loan Programs
Determine which type of mortgage is best for you most importantly, and then research different mortgage options. Some products allow for higher debt-to-income ratios, while others offer lower down payments. If credit scores are your problem, there are options for that as well.
Upon finding out why your home loan proposal was discarded, see if you qualify for any other programs that fit your needs. Most lenders offer a variety of products. If your lender doesn’t, consider looking locally and finding someone with more to offer. Local lenders know the procedures in North Carolina, which can only benefit you.
Monitor Your Credit Score
The higher a buyers credit score is, the lower his or her interest rate will be. Now is an imperative time to monitor your credit score in order to plan towards getting approved in the future. Certain lenders and specific loans require minimum credit scores, but the majority has similar guidelines in regards to credit. For example, in order to get approved for an FHA mortgage, you’ll usually need a minimum score of 640. Credit Karma is a free program that allows you to do this.
Make Payments on Time
The easiest way to ruin a credit score is by consistently making late payments or letting your accounts go into default. Making payments on time will continually boost your credit score month after month. This doesn’t just mean your large credit card and auto bills. This also means your everyday bills such as utilities or cell phone. These may be able to count as an alternative source of credit towards a home loan, so it’s important to show that you can be responsible in that aspect.
Continue To Save
Many people give up after being denied for a home loan. Instead, focus on utilizing your credit wisely while saving at the same time. Often times, buyers feel as though there isn’t any reason to save money for a home since they aren’t actively in the process of purchasing one, which results in failure to save. It’s important to be putting aside money each month while you wait to try again. Home loans come with costs, as many seem to think that the down payment is the only major factor.
Everyone’s dream is to own their own home, and you’ll eventually get there. If you’ve been turned down for a home loan, don’t lose hope. While staying positive, continue to believe in the process that goes into buying a home. There are plenty of resources including local realtors who can keep you on the right track towards getting approved in no time.
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