What Are Some Potential Problems in Getting a Mortgage?
| The ability to manage money. |
It’s always a good idea to be prepared for whatever might
happen during your mortgage loan application process. Knowing what can be
problematic can help you avoid these pitfalls!
So what problems have we seen?
Too much debt.
This is a major issue for a number of different reasons. Your debt-to-income
ratio is one of the most important issues in your mortgage loan application, as
well it should be, as it says a lot about the state of your financial health.
If you have a low debt-to-income ratio, then you have less debt—and if you
don’t have a lot of debt, you can use the money for other things!
A 41% DTI is
the most common limit. The DTI is calculated by dividing all (credit reporting) monthly payments by the gross
monthly income.
Not enough income.
The other side of the debt-to-income ratio needs to be a higher number, and you
must supply some proof of your income to qualify for a mortgage loan. Your
income plays into the debt-to-income ratio, but it also gets examined in terms
of a monthly budget ratio.
What’s the
difference? Just because you qualify for a loan with a 40% DTI, for example,
your actual living costs may be significantly higher due to expenses that
didn’t make it into your credit report (groceries, entertainment, utilities,
hobbies, daycare, etc.).
The type of property/how it will be occupied. There are a number of different “kids” of properties, and how your property is classified (single-family home, townhouse, planned unit development, condominium, etc.) can impact your mortgage loan application. Your plans for occupation can also affect it: mortgage lenders are usually more inclined to sign off on primary residences (people are far less likely to default on loans for a primary residence than they are on a vacation or income property).
Legal issues. Mortgage companies do not like to approve you if you’re involved in a lawsuit; but it doesn’t stop there. If the IRS has put a lien on your wages (or property you may already own), then that’s another “legal” issue that will be problematic for you. Finally, a recent divorce or even death that caused probate or title issues is another red light: lender would prefer that you settle any such process before applying for a mortgage loan.
Not enough money.
·
Let’s start with the cash
reserves you have in the bank: mortgage lenders are most comfortable with
six months’ mortgage payments available to you in case you’re unable to make
payments on your own for a few months.
·
Next, the lender needs to see that you have enough money in
addition to the cash reserves to make the required down payment on your mortgage.
·
Finally, your history of delinquent bills tells the lender
something about your ability to manage money.
Labels: get a mortgage, getting a mortgage, getting a mortgage loan, how to get a mortgage, preapproval for a mortgage
posted by Avrus Mortgage @ Wednesday, September 12, 2012
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