My mortgage application was turned down. Now what, Lee’s Summit?

Olga Marquez
Olga Marquez
Published on August 22, 2018

 

Sure, the results of an appraisal and the home inspection can stop a Lee’s Summit real estate deal dead in its tracks, but what if you never get that far in the process?

What if the lender turns down your loan application – is there anything you can do to buy a Lee’s Summit home?

That depends on why the lender denied your application, and there are several possible reasons.

Let’s take a look at them and see if we can’t get you back on track to buying a home in the Lee’s Summit area.

Low or insufficient credit score

Pulling your credit report will be one of the lender’s first tasks and low or spotty credit records are the most common reason that someone is denied a mortgage.

If you applied for a conventional loan and were turned down for this reason, consider applying for a loan using an FHA-backed mortgage. Consider assistance from the City of Lee’s Summit or the State of Missouri

The score requirements are a lot more relaxed and lenders are more likely to take a chance on you when the government is promising to repay them should you default on the loan.

Another way to approach the credit score problem is by paying a larger down payment, if you can afford it. Lenders take large down payments quite seriously and are willing to overlook other problems with the application when the borrower has some “skin” in the game.

Plus, the larger down payment will bring down the amount you need to borrow for your Lee’s Summit home.

If none of these alternatives work, take a break from the Lee’s Summit house hunting while you work on your credit score.

See me to have our Lee’s Summit in-house lender run your score simulator for FREE, so that you know what you need to do to improve your score. Sometimes, it’s as easy as paying an extra $50 to a credit card. You’d be surprised. Not to mention the simulator will give you a guided path to work on your credit score.

The experts at Fair, Isaac and Company, or FICO as they are known, remind consumers that “repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score.”

Get current on any bills you’re behind on and pay all bills on time going forward. Reduce your debt as much as possible and keep the balances low on your credit cards.

Lower your ratios

One of the aspects of your finances that the lender’s underwriter scrutinizes is your debt-to-income ratio (DTI). If they turned you down because yours is too high, get to work lowering it. There are three ways to do this:

  • Increase your income
  • Lower your debt
  • Do a combination of both

Unacceptable employment history

The days of the so-called “liar loans” are long gone and today, lenders look for at least two years of consistent job history, either with the same employer or in the same industry. Even the self-employed applicant will need to meet this two-year benchmark.

If your loan denial is the result of unacceptable work history, consider waiting until you have the required amount of time on the job before reapplying.

Otherwise, keep shopping around for a loan but chances are, most Lee’s Summit lenders will deny your application for this reason.

If you need a second opinion, I recommend you make an appointment with my in-house lender. She is here in my Lee’s Summit office and has processed more State Assistance loans than any other loan officer. She is listed as #1 on the Missouri State website. She is the best, and ready to serve you.

Last minute denial

Just when the purchase seems to have overcome the most common obstacles and you’re mentally moving in to your Lee’s Summit home, the lender sends you a message that your loan has been denied.

How can this happen?

Two reasons come to mind: the appraiser said the Lee’s Summit home isn’t worth the amount of money you want to borrow or your financial situation has changed since you first applied for the loan.

Lenders will perform one last pull of your credit information just before closing, so it’s important that your financial situation remains consistent from the time escrow opens until it closes.

Don’t make major purchases on credit, don’t apply for new credit, don’t switch jobs or banks

We aren’t mortgage professionals but are happy to refer you to a Lee’s Summit professional should you have any questions about getting a loan, or about the mortgage process in general. Simply make an appointment today!

 

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