Why Do Banks Reject Mortgage Applications?

Discover Top Reasons of Mortgage Application Rejections and How You Can Avoid Them

Getting a mortgage loan approved is no easy feat nowadays. Bank policies have turned a lot stricter in the past few years and today only 55% of the overall mortgage applications get approved. If you are thinking about a new home or a refinance, you need to know all the facts beforehand to avoid any problems later on.

What exactly are the reasons that result in a loan rejection? What criteria do the banks use in judging an application and how can you get your loan approved? Keep reading to find out.

Reasons of Loan Rejection

You Haven't Documented Your Income Properly

When filing an application for a mortgage, credit score is not the only thing you should be worried about. Your income details are equally important and help clear the way for a smooth loan transaction. Several factors can affect your document profile, including frequent job switching. Thus, aside from your cash reserves and your credit, do keep an eye on the extra factors such as tax payments, professional experience, previous track record etc too.

You Are Ignoring the Compensating Factors

Even if your previous track record is a little weak, there are several compensating factors that can make up for the hitch and increase your chances of a loan approval. These include a down payment greater than 20%, cash reserves and savings, a credit score higher than 740 etc.

You Haven't Chosen the Right Property

The choice of property matters a lot. Make sure you choose a property that is not only reminiscent of your lifestyle but also falls in your budget. If you are applying for an unrealistic loan that you can't even afford in the long run, it is most likely going to be rejected. Also, there are certain kind of properties that are difficult to get financed, like second homes and investment properties.

The Appraiser isn't Qualified Enough

Appraisal is one of the most important steps of investing in a property. Make sure you hire a professional and experienced appraiser who conducts a physical appraisal of the property. Relying on sales figures of the neighborhood and online values is not enough - you need physical evidence to assure your lender about the authenticity of the loan.

The Mortgage Broker is Inexperienced

Choosing the right mortgage broker is also important, as it is he/she who will be making the final deals with your lender. Choose a licensed and experienced mortgage broker to avoid any problems in the future.

You Aren't Aware of the New Rules

Even if it all goes smoothly, be aware that there are certain government imposed rules and laws that are applicable on loan applications. To stay on the safe side, do your research before making the final plunge and make sure your documentation and record supports the loan and property you intend to get.

The Choice of Bank is Wrong

It is never a good idea to take up the first loan by the first bank that comes your way. Choosing your bank and then your mortgage plan is a critical factor, and not only does it affect your mortgage application but can also save you a lot of money. Choose a reliable and reputable bank and then go for a loan package that best pertains to your needs and requirements.

Following these ground rules will bring you one step closer to loan acceptance and you will be all set to move into your new home!

Tony Busanich is a loan officer with TD Bank, a portfolio leader from Maine to Florida. You can trust TD Bank to deliver a superior mortgage experience. Whether you're purchasing or refinancing, we provide straightforward, easy-to-understand products and advice, allowing you to make smart borrowing decisions that meet your needs today and tomorrow. My web site at www.tdbank.com/tonybusanich includes mortgage rates updated every morning. You can run different scenario that include monthly payments, different programs and closing cost. Please contact me at 908-300-6660 or by email at anthony.busanich@td.com and on my web siite at www.tdbank.com/tonybusanich