Knowledge is power. You have the ability to greatly improve your chances for success once you know what you should and shouldn’t do to obtain home financing

10 Reasons Loans Get Denied 

  1. The borrower’s credit score or items on the report. Keep in mind most home financing programs required the borrower to have at least 2 open accounts with over 12 months history that have not been late in the past 12 months! Remember it’s not only the “bad” stuff on the report the borrower needs to focus on. The “good” stuff has to be there as well. A loan could be denied if: the score drops below the minimum needed for the program during the processing of the loan.  Some of the top 10 reasons loans get denied, and your credit scores drop are: recent late payments on any account, new purchases are added, charges over 50% of available credit are made on revolving accounts, co- signing or becoming an authorized signer on an account, new public records that are derogatory are added, borrower disputes an item, new tax liens, bankruptcy, foreclosures, repossessions, collections, charge offs and short sales.

  2. Omitted debts (alimony, child support, employment loans) on applications or no explanation for non-income large deposits.

  3. Poor residence stability or poor rent payment history.  Any late payments on rent in past 24 months.

  4. Too much layering of risk— payment shock, limit to reserves, debt to income ratios aren’t satisfactory. Can’t prove future occupancy. Time on current job is too short and poor job stability overall will contribute to the top 10 reasons a denial will result.

  5. Employment – Borrower has a job change, works less hours, lower income, loss of job, becomes self employed or becomes involved in current litigation.

  6. Appraisal – The value does not support the loan and negotiations between the Buyer and Seller fail. There are not at least 3 acceptable/recent comparable sales for this property. No explanation on any adjustments on comparable sales in the appraisal.  Highest and best use of the property is not residential.

  7. Property fails— The Seller refuses to complete repairs needed. There are Liens against the property that aren’t in the clear. No resolution on HOA or COA current legal issues.

  8. Interest rates increase which causes the payment to exceed what the borrower can afford.

  9. Loan program/guidelines change which causes the borrower to not qualify.

  10. Borrower no longer has funds needed to close the loan (down payment, closing costs and prepaid expenses). Borrowers result in divorce or one of the borrowers die.

For pre-approval, A competent/professional mortgage loan originator should be chosen once a borrower has made a decision to purchase a home and needs home financing. This takes all the guess work out of home financing and should dramatically improve the chances of gaining final loan approval.

Kathey Grodi is a retired CPA who has over 24 years of experience in originating mortgage loans!  For pre-approval, call Kathey today at 615-970-2216 or 417-337-0377.  She has over 24 years of experience and would love to provide you with financing!  Contact Kathey Grodi today!