Everyone dreams of living in a house they can call their own. Thanks to mortgages, homebuyers can now realise their dream of buying their own homes. But before you go hunting for new houses for sale in Townsville, know this: You may qualify and meet the minimum home loan requirements. However, that doesn’t guarantee that you’ll get a yes from your mortgage lender.
This article will not discourage you from submitting your home loan application. This is to let you know of the surprising reasons that can cost you your mortgage so that you can avoid them. Some homebuyers get rejected due to a poor credit score, a high DTI ratio, or an unstable income source. But other things can cause you to get a mortgage rejection.
Your down payment is too low
There are home loans that accept a down payment of less than 20%. While you may afford the lowest down payment allowed, your lender will check other details to see if you can really afford the mortgage. If they think that what you can afford is too low, there is a possibility of them rejecting your application. It would be best to save more than the minimum down payment not only to avoid a mortgage rejection. You’ll also get to enjoy lower monthly fees and total interest costs.
You have skipped some pertinent details in your mortgage application
Homes are a substantial investment. Your mortgage lender will want to make sure that you can provide all necessary details to help them check if you’re capable of paying the loan off. By leaving some details, this can cause your lender to think that you’re not eligible for a home loan. Make sure to always be upfront. Your underwriter is sure to find out everything about you anyway.
You have accepted gift money
Who wouldn’t want to receive free cash? But taking monetary gifts and transferring them to your account can cause problems when applying for a home loan. Some home loans allow down payments to be gifted. Know the rules to follow when documenting down payment gifts. These will include the total amount given, name and details of the giver, and an explanation that the money is not a loan.
You are borrowing too little cash
It is true that the smaller amount you borrow, the better. This is since it is much easier to pay off a smaller debt. However, this can also be one of the reasons your lender can reject your loan. If they think that they won’t be able to make much profit, they can either urge you to borrow more or find another borrower who needs an even bigger loan amount.
The appraisal value is far too low
Are you willing to pay $5,000 for something worth only half the price? The house you’re buying is your collateral against the home loan. Your lender will want to make sure that it is worth the amount they are lending you. Your house appraiser will look for just about anything that can affect the value of the property you plan on buying. The great news is that you can challenge a low home appraisal by offering less than the asking price or finding another house to buy.
Homebuyers get rejected for a home loan for many reasons. By keeping this list in mind, you get the advantage of knowing five of the surprising things that can cost you your mortgage. Preparation is key to a successful home loan application. Don’t settle on qualifying for the minimum requirements. Do due research to avoid the things that can lead to a home loan rejection.