Mortgage Denial - The Facts you Need To Know To Succeed

Often, when your lender scrutinizes your loan application for a new home or piece of property so thoroughly that it is finally turned down, it can be very distressing. If this happens, you should be able to understand just why such a decision was taken and do what you can to remedy the situation. The causes for rejection given below will help you understand just why it happens to some people.

Causes for rejection:

There is a term called LTV, and this means that the appraised value of the property you want to purchase is much lower than the purchase price or loan-to-value ratio.Or it may be just the case that the LTV is just too high for the lender to approve. He may be restricted to a certain ratio and there is nothing he can do about it. Maybe you have applied for 90-95% of the buying price as the loan amount. This will result in a low appraisal having the effect of making your request way too large for the lender.

Another case is that if the price of the property is far higher than comparable properties in the area, then you need to ask the seller to reduce his price in line with the going rate for similar properties in the locality. Any new price negotiated should also be certain to be approved by your lender. If not, the only option open to you is to accept a smaller loan and pay the shortfall from personal funds.

Just not enough personal finances to complete the deal. In this case the lender may decide that you do not have enough capital for the down payment and the closing costs. In this instance you could try asking the seller to take back a second mortgage on the property. This would decrease your down payment or get the seller to help you with some of the closing costs. As a last resort you may have to begin a new savings scheme to come up with more capital for the future.

Then there is the question of your existing income level. Are you earning enough to begin with? You will be turned down if the mortgage payment exceeds 28% of your gross monthly income. Also, in the situation where your total debt including your mortgage repayments and any other installments exceeds 36% you may be turned down for your loan. But if your credit card situation is in good standing and you can show that you have a big household expense including rent or mortgage repayments the lender may consider ruling in your favor. It is so important to be perfectly truthful about your income and expenses in all your dealings.

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