Rejection is never easy, but it's how you pick yourself up and carry on with things that really matter.
When looking to buy a home, though, being denied for a loan could mean the difference between closing a deal and walking away empty-handed.
If you find yourself in a situation where you've recently had an application for a home loan rejected, you may be wondering why and if there's anything you can do about it.
The good news is you're not alone, and this doesn't have to be the end of the road for your dreams.
With one in nine home loan applications being rejected, there are, of course, other alternatives.
In this blog post, we’ll quickly walk you through what might have gone wrong and how you can get back on track to owning a home.
There are a series of hoops you must pass through before finally securing your funds when it comes to any form of financing. Unfortunately, if you fail to make it through, you'll be left wondering why. With home loans, there are a few common reasons:
Before applying for a home loan, it’s best to go easy on your lines of credit. When you apply for a home loan, lenders will assess your recent finances and gauge whether your debt-to-income ratio is low enough to take on a new financial burden.
They do this by taking the total amount you pay to cover your current debt and dividing it by your total monthly income. Anything above 40%, and you'll be red-flagged.
If you know you'll be applying for a home loan, try to use your credit cards less often and pay off their balances as soon as possible. The less debt you have to pay, the more likely you are to be approved for a home loan.
When lenders evaluate an applicant, they want to see stability. This covers a lot of ground, though. What you might not realize is that your employment record will also be scrutinized as a sign of your stability.
Long-term employment shows that you are reliable and hard-working, yet, if you’ve recently changed jobs, lenders may be wary about financing your loan. This is particularly true if you were fired from your last job.
If you feel hesitant to submit a loan application because you’ve recently changed jobs, have your new employer submit a few pay stubs with your application to act as supporting documents.
As you can probably tell by now, lenders are incredibly picky about who they grant loans to.
If you left out some information you thought was trivial, it might have come back to bite you in the butt. It's essential to be as thorough in your details as possible. This includes disclosing any financial mishaps in the past or unpaid debts.
Let's say you did everything you were supposed to do, and yet you were still denied for a new loan. It may just be that your credit is not good enough.
What, then, can you do to get financing for a new home? First, start by asking the lender why you were denied.
They are required to tell you, and with that information, you can go about fixing the problem. Ask questions, and don't be afraid to try again.
If you were denied because of poor credit, you can try finding a cosigner, put up collateral on your loan, or go through a credit restoration service to improve your chances.
This doesn't have to be the end of the road. Countless people have been rejected for a home loan and still managed to find a way to make it work. As we said, it's not about being rejected; it's about how you pick yourself up and keep going.