Mortgage Application – 5 Reasons Why You Might Not Qualify

So you’ve been turned down by the banks for your mortgage application and you’re now seeking professional expertise to help you qualify for a mortgage. In most cases, an independent mortgage expert can help review your situation to get you in a better position during your mortgage application. Here are 5 common reasons for being declined by the banks.

1. Short on the Down Payment

The minimum amount you must put down when purchasing a home is 5%. If you are looking to purchase a rental property or refinance your current home a 20% down payment is required. Mortgage applicants must come up with the funds on their own or get help from a friend/family member. Any funds received from a lender cannot be used as part of a down payment. Be sure you save enough to meet the minimum amount for the home you are looking to purchase.

2. Limited Income

Sometimes the reason you get declined for a mortgage is simply because you are not earning enough money. Your income must be enough to cover a mortgage payment, property taxes, condo fees (if applicable), any existing debt, as well as have enough money to sustain your everyday expenses. Some lenders may allow you to add other sources of income, or add a person on the title to increase your chances of qualifying for a mortgage. You can discuss any of these mortgage application options with a mortgage professional.

3. Problems with Credit

That unpaid parking ticket may be coming back to bite you. You might not be aware of it but quite a number of items can affect your credit score on your credit report. Some examples that contribute to a lower credit score are:

• Late credit card payments
• Going over your credit limit
• Pulling up your credit report often
• Any debts sent off to a collection agency

The worst of them all is bankruptcy, which has a great impact on your credit score and can stay on your report for as long as 7 years.

4. Overwhelming Amount of Debt

The bottom line is that you are spending way over your budget! With credit card debts on the rise and many people turning to lines of credit, people are quickly accumulating an overwhelming amount of debt. You should pay off a majority of your debt before even filling out a mortgage application. Start saving! Put away a small percentage of every pay cheque into a personal savings account or consider opening a Tax Free Savings account.

5. Changing Mortgage Rules

The mortgage world is always changing: rates are changing, housing prices are changing, and that means mortgage application qualifications are changing. For example, if you plan to make less than a 20% down payment, the new rules will adjust your debt servicing ratios and amortization. This tightens the qualification pool equivalent to as if the interest rate went up 1%. Speak to a mortgage expert if you think you might be affected by the new mortgage rules.

Remember to take all these factors into consideration and be prepared when applying for a mortgage. Don’t be discouraged if you don’t qualify right away, talk to one of our trusted Calgary mortgage experts at AC Lending Group to help you get started.

Original Post:
Found here by:
PAULINE TONKIN
Dominion Lending Centres – Accredited Mortgage Professional Pauline is part of DLC Innovative Mortgage Solutions based in Coquitlam, BC.