Reasons a Loan May Be Denied
Have you ever applied for a home loan due to the low mortgage rate, only to find out you don't qualify? If so, here are a few reasons why you may have been denied a loan, and some tips on how to prevent it.
Low Credit Score
Your credit score plays a major role in whether or not you will qualify for a loan. At RP Funding, you must have a credit score of 660 or higher to qualify. To assist borrowers with low credit scores, RP Funding provides a free, 6-Month Approval Butler program that helps get your credit back on track.
Too Many Credit Checks
Having credit cards that have a balance that is 50% of the allowable credit line may hinder your credit score. In order to improve your credit score, it's important to pay down your amount owed. When trying to qualify for a home loan you may be tempted to inquire about your credit score multiple times to track its improvements. However, it's best to try and limit your credit checks to mortgage-only credit pulls because "normal" credit checks can also lower your credit score.
Too Much Debt
Debt not only plays a role in factoring your credit score, but also in your ability to get a loan. Be sure that when you pay off your credit cards or other accounts, your statement reads "paid-in-full." Otherwise, it reads on your credit report as a balance owed, even if the balance is zero.
Too Many Loans
Other loans that you have outstanding, such as a vehicle loan, will also show on your credit report. Be sure to pay these items off as soon as possible and keep record of your payment.
Another factor that can affect your chances of getting a loan is your income. The more income you have to show, the better your chances are of receiving funding for your loan. If you are self-employed, but aren't showing enough income, you lose some of your borrowing potential.
Changes in your occupational status can affect your loan, as well. For instance, if you change jobs to a completely different line of work, you lose the job history needed for a loan. Maintaining full-time employment is the best way to secure a loan as it shows you receive a stable stream of income.
Another item that can affect your chance for loan approval is the assets you have available. Loading cash transactions into your account may be normal to you, but to receive loan funding, you must be able to show where this cash came from. The same goes for transferring money from one account to another. If you need to do it, make sure you keep a clear track of where the money is coming from at all times.
At RP Funding, we consider a number of variables when it comes to qualifying you for a loan. For more information, please contact us at (321) 397-4420 to speak with a home loan specialist.