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Signs that your home loan application is in trouble

Signs of rejected application

The joys and excitement of buying a new home are sometimes ruined when your application for a mortgage is rejected by the lender. If your loan request has been denied, you must understand the reasons why the loan was rejected and what option you now have left to correct the problem again in the future. The following signs will help you to detect those common causes for loan denials and effective steps you can take to prevent it.

1. Lender wants more missing docs

If you have ever applied, you have most likely had missing documents. Many consumers or borrowers get frustrated by preparing and submitting a loan application and the lender again asks for more. If you don’t have any clue about how to efficiently process the application, you may not know when to provide needed documents before your lender needs them. If you can’t push your application in underwriting, it will take a long time to get into a decision.

2. Loan denied for several reasons

Borrowers applied for loans several times and keep getting denied for different reasons. The reasons may be for missing documents, affordability, and so on.

It’s important to know why you are not getting qualified. You might have issues regarding your mortgage payments, it doesn’t mean that your lender will also give you a mortgage. You either qualify or not based on government or lender’s choice.

If you keep applying for the same financial problems and financial status, you may not get anything if you don’t fit into the guidelines.

3. Hiring a loan modification company

There are several companies in the market that contact to consumers for soliciting their services. Many of them have up front fees and assure you with methodical, generic conversation. Lender's claim it may consume almost 30 to 60 days to review your application. But practically, it’ll take 60 days (more or less) to process and negotiate the application.

The process really depends on various factors like the homeowner’s cooperation, the lender, and other parties.

4. Your home in underwriting for long

Your mortgage application is may be in the underwriting process and you’re in a pending decision. If your underwriter has further queries about your application package they might ask for additional documents to clarify details in your application.

Even after getting your last month’s bank statements, the underwriter may need to be updated. If the underwriter asks for new bank details, your file may leave underwriting until you submit the bank statement. The underwriter will review your single point of contact and move on the process. New requests and any missing document may also cause a delay in the process.

5. You have equity in your home

If your home has equity, you may not be eligible for loan modification. Homeowners can be denied for the loan modification is they’re gonna sell their home and pay off the first mortgage.

6. Mortgage to income ratio too low

If you’re MTI is lower than your 25% gross monthly earning, you may not qualify for HAMP. Your lender may consider your mortgage payment is affordable as per the lender's mortgage.

7. Mortgage to income ratio too high

If your mortgage to income ratio is too high, that means your income is low. So, your lender may easily reject your application if they are unable to find any post modified payment between 25% to 32% of your gross monthly income. Lenders will review the interest rate, the term, principal balance, and others to make sure they can refinance or modify your mortgage.

8. Debt to income ratio too low

If your DTI ratio is too low, it means the lender may think that you are saving a lot more after making your monthly household payments. The lender will be sure about your affordability. The lender can offer you a repayment option to help you pay off your delinquency, and that may not lower your monthly mortgage installments.

9. Debt to income ratio too high

If your DTI ratio is too high, it means your expenses are more than you earn. If your monthly budget doesn’t permit you to pay off the monthly mortgage installments or a refinance payments, the lender may not allow you to get a mortgage at all.

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