Just like I've been saying... From the NYTimes Real Estate section this weekend.
Last year more than two million people were turned down for home loans, according to federal data, often because they didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic.
That number doesn’t even include those who abandon the often-complicated mortgage qualification process. The Mortgage Bankers Association estimates that about half of those who try to refinance and 30 percent of buyers are either denied or drop out.
Lenders’ underwriting criteria have become more rigorous in recent years; some banks have tightened up beyond federal requirements. Here are the biggest triggers for rejection, according to industry experts.
INSUFFICIENT INCOME Lenders want to make sure you can afford to make the mortgage payments. Someone who earns, say, $40,000 a year need not bid on a $750,000 apartment, unless there’s a trust fund with quarterly payouts or other money available. Also, lenders typically look for at least a two-year track record of income, which could hurt those who may have switched jobs recently.
CLOUDY FINANCIAL PICTURE Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of your adjusted gross monthly income.
BAD CREDIT Lenders typically reject applicants with a FICO score below 620. It is estimated that about a third of Americans have credit scores so low they are unlikely to obtain any mortgage.
LOW APPRAISAL You may think the home you’re refinancing or buying is worth around $800,000, but the appraiser says it’s closer to $700,000. Suddenly your new mortgage is in jeopardy. This is the predominant reason people are denied home loans today, according to industry experts.
PROPERTY PROBLEMS Sometimes issues turn up within a building, apartment unit or house, like a major repair or safety problem that needs to be addressed before an application can be approved. Other times, he said, it may be financial woes within a condominium or co-op, like having a large number of owners delinquent on their fees, or unfinished common areas or amenities.
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Excellent article, I’ve never seen this info in concise form with an explanation before. Great work! I appreciate it.
ReplyDeleteInteresting what you shared about the credit score being affected almost similarly by both foreclosure or short sale. They are very similar. The benefit of a short sale is the fact you can usually buy a home again in a shorter period of time.
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