If you have been declined for a mortgage, you may think that buying that new home is out of reach; however, there are ways to turn a rejection into an approval and to find a more accessible loan. Here are just a few steps you can take to learn about your loan options and get the mortgage that works for you.
Find Out Why The Mortgage Application Was Denied
The first step to getting a second opinion is to find out why your mortgage application was denied. Banks commonly deny mortgages for reasons like a low credit score, a high debt-to-income ratio, a low appraisal, or concerns about the applicant’s past and present employment status.
To qualify for a mortgage, most lenders want to see someone with a credit score of 620, a debt-to-income ratio of less than 43 percent after the mortgage is included, and at least 30 days in your current position if using wage income to qualify for the loan.
If your credit score is low, take steps to improve it, such as the following:
- Pay all bills on time
- Don’t spend more than 20% to 30% of your credit card limit
- Pay more than your minimum credit card payment
- Don’t take out any other loans
- Have errors on your credit report investigated and rectified
If you were denied a mortgage because of a high DTI, then do what you can to pay down your debt. Otherwise, you may want to do what you can to increase your income to offset your debt load.
If the problem is a low appraisal, then you may want to hire your own appraiser or ask the lender to re-do the appraisal. Otherwise, you may need to renegotiate a lower price with the seller. In the worst case scenario, you may need to come up with more money towards the down payment to reduce the loan amount requested.
Not All Lenders View An Application The Same Way
A good reason why it is worthwhile to ask for a second opinion about your ability to get a loan is that no two lenders will view an application the same way. For one lender, a credit score of 650 is insufficient for getting a loan – but another lender might be more than happy to offer you a mortgage with a score of 650. To get a second opinion, you may wish to talk to a mortgage broker who will be able to scan a variety of loan programs to find one that works for you.
There Are Ways To Find Down Payment And Closing Cost Assistance
Those who have a low credit score or other questionable metrics may be able to qualify for a loan by offering a larger down payment.
While a first-time buyer may not have the cash on hand to make a larger payment, there may be programs that provide grants or low-interest loans that can be used as part of your down payment or to help pay closing costs. With this extra money, it may be possible to overcome lender objections and obtain a mortgage.
If your mortgage application has been rejected, it doesn’t mean that you can’t get a mortgage from another lender. If you’re ready to buy a house but just need to clear the mortgage approval hurdle, there are ways to get a leg up.
Have Questions About Mortgages?
If you have questions about home mortgages or are ready to apply for one, call the experts at Sammamish Mortgage. We are a local, family-owned company based in Bellevue, Washington. We currently lend in all of Washington, Oregon, Idaho and Colorado and have a variety of mortgage programs to offer borrowers all across the Pacific Northwest. Please contact us if you have mortgage-related questions.