For the majority of the American population, buying a livable home for cash simply isn’t a possibility. This is why the percentage of Americans who rent their homes has slowly grown, with many citizens struggling to pay that as well.
Fortunately, hope is not lost thanks to mortgage refinance companies like Atlantic Home Capital. These businesses give people loans for a specific purpose, like buying property, so long as they meet certain criteria. It’s important to know what sort of loan you’d need for your intended use. Check out this blog post to gain a better understanding of how they differ.
What Is A Home Loan and How Does It Work?
Conventional loans will adhere to certain stipulations, meaning each applicant will be held to a similar set of standards. By obtaining one of these loans, one can buy their dream home by paying a small percentage of the price and paying the outstanding amount in chunks over a longer, pre-agreed time.
There are non-conforming mortgage loans for people with extenuating circumstances (veterans, for example). These loans are generally more favorable but less consistent, and some stipulations are still in place.
Regardless of the loan you apply for, several things could become grounds for rejection. While a denial won’t hurt your credit score, it doesn’t look great either. Along with that, it’s a waste of time for both parties.
How Can I Avoid a Rejection?
While it is at the discretion of the mortgage broker whether to process the loan, they’ll make that judgment based on how likely they think you will pay back the loan. Here are a few things that are scrutinized more than others:
Credit History
Any home mortgage lender worth their salt will review your credit history and score from start to finish. Your history will more or less encapsulate your financial history, and your credit score rates your credibility as a borrower. The number will be somewhere between three hundred and eight hundred and fifty, the higher side being more advantageous. You can ensure you have a good credit score by making sure never to let any loans or bills go past their due date.
Poor Credit History
If you have a low credit score, indicating that you perhaps haven’t paid back past loans in a timely fashion, then it’s unlikely you’ll be able to get a mortgage that helps you in the long term.
Some lenders may give you one with a very high-interest rate, meaning that you’ll have to pay back a higher amount than you borrowed. Unless the loan is very urgent, this is something that most borrowers would seek to avoid.
No Credit History
If you’ve never borrowed money or even used a credit card, then you won’t have a history at all. Don’t think of this as an advantage because it’ll call into question your ability to pay back something like modular home financing with no experience as a debtor.
High DTI Ratio
DTI means debt to income. If you are currently in debt, and most of your income is directed to paying it back now and in the near future, you certainly won’t be seen as a credible applicant for a conventional mortgage.
Insufficient Down Payment
The down payment is the percentage of the price that you pay upfront. The preferred number will depend on your loan type, but for a conventional loan, it’s around twenty percent of the total cost of the property.
Missing Information
If your documentation isn’t complete, or you leave blank spaces in your application, you’ll be turned away. When you’ve credited a large sum of money from a financial entity, they’re essentially betting on your ability to pay them back with interest. If you don’t, they will have lost revenue.
That’s why they need a comprehensive idea of who you are and your earning potential.
Frequent Job Changes
If you haven’t had the same job for too long, it can make you look like a flight risk. Remember, mortgage loans are given based on trust and visible stability. If your record makes it appear that your income isn’t consistent, that is a cause for a rejected loan.
Past Rejections
A rejected loan itself is grounds for denial. Refinancing services can be put off by previous rejection, even if your current application is stronger. That’s why it’s best not to apply until you’re sure you’re ready with all the documentation.
Atlantic Home Capital is a licensed mortgage lender in NY and several other US locations. Their mixed-use financing services and VA Loans are known for their transparency and client-centric approach. If you’d like to bite off a piece of the Big Apple, check out their New York home loans, or build your portfolio with an investment property loan. To discuss it with their team, call (877) 276-6400.
About the Author
Amara York has worked in banking for seventeen years. She has accepted and rejected over a hundred loans and has helped numerous first-time buyers buy their dream homes. She has a wealth of information regarding the US banking system, but even so, she’s looking forward to her retirement next year. A born and raised Brooklynite, she’s got ambitious travel plans that she has no intention of missing.
