Top 6 Reasons Mortgage Applications Are Denied

About 50% of home refinance and  30 percent of purchase mortgage applications are denied.

 It's tough especially since mortgage lenders have become increasingly restrictive in terms of their lending guidelines since the housing market crash.

Here are the top 6 reasons mortgage lenders reject applications.
1. Income issues. Most failed mortgage applications falling into this category have income too low for the mortgage amount they are seeking. But increasingly, the recent turmoil of the job market are also causing this issue, as people who have changed their line of work or have changed from salaried employee to freelancer over the last couple of years can also have their home loan applications rejected based on income.When you are self employed you must show proof of at least 2 years income.If you have not been in business for at least two years you will not be approved for a mortgage.

2. Debt To Income Ratio. If the mortgage for which you're applying plus your monthly payments on credit card, car and student loan debts are more than 45% of your total gross income, you could have problems qualifying for a home loan. You might also run into problems if you rely too heavily on bonuses, overtime, cash wages or rental income, all of these can be difficult or impossible to get a mortgage.

3. Credit issues. Today, the mortgage-qualifying FICO score cutoff falls somewhere between 620 and 660, depending on which lender and which loan type you need. More than one-third of Americans, by some numbers, have credit scores too low to qualify for a home loan. Even if your credit score is high enough to qualify, if you have any late mortgage payments, a short sale, a foreclosure or a bankruptcy in the last 2 years, loan qualifying could be difficult.

4. Property didn't appraise. Since the whole industry had its hand smacked for allowing home values to skyrocket in a very short time, (2002 to 2006) appraisal guidelines have tightened up. So, it is increasingly common to have the property appraise for a price lower than the sale price negotiated between the buyer and seller.Keep in mind that as you negotiate back and forth with the seller, there might be some foreclosed properties in your neighborhood that just sold at lower than expected which brings down the value of the property you may be tring to sell. This change the whole game and unavoidably brings the value down of the properties in the neighborhood.

5. Condition problems. With all the distressed properties on the market, and with most non-distressed sellers barely breaking even, more home-sale transactions than ever are falling apart due to condition problems with the property. Many lenders will not extend financing on homes where the appraiser points out problems like cracked or broken windows, missing kitchen appliances, electrical problems, or wood rot.
And in the world of condos and other units that belong to a homeowners association, if more than 25 percent of units are rented (rather than owner-occupied) or more than 15 percent are delinquent on their HOA dues, new applications for refinance or purchase mortgages on units in the development are likely to be rejected.

6. Technical difficulties with application. The days when lenders just took your word for it are long gone. Applications with incomplete or unverifiable information will fail. If any of these mortgage loan application glitches arise in your homebuying or refinancing process, it's critical that you connect with your mortgage professional to determine what course of action to take to get your loan approved.