Buying a home is like a dream come true for most people. However, not all of us have sufficient capital to make a property purchase on our own finances and end up taking out a home mortgage for the purpose. Here are a few common mortgage loan problems that most people encounter when trying to get an approval for the credit.
Mortgage Loan Problems with credit blemishes
If you have a history of delinquent accounts or late/missed payments, you might face considerable difficulty in availing a mortgage loan. Lenders typically establish your credit worthiness by pulling out your credit reports. If they find a bothersome number of negative remarks, they might reject your loan request.
Mortgage for fixer uppers
In case you are planning on buying a property that requires major renovations and repairs to make it habitable, you might find it difficult to get your home loan approved. Such properties are termed as fixer uppers and often require repair work that exceeds 3% of the actual property value. In most cases, the lender will approve a separate loan each for making the repair work and for purchasing the property.
Low appraisal of your property
If the appraiser evaluates the property price as lower than what you have borrowed, your lender might reject your mortgage application. This is because your property acts as collateral for your mortgage and needs to be equivalent in value to the loan availed. There is considerable risk of default in such cases and the lender will not be able to cover the expensive losses by selling off your low-value property.
Most importantly, you might be denied a mortgage if your debt to income ratio is too high, implying that you already have enough debts and might not be able to afford an additional loan.