Recently, a federally compiled study scrutinized millions of buyers seeking mortgage loans. The study identified the three most common reasons why buyers are rejected by lenders during the mortgage application process.
- The most common reason why buyers are rejected by lenders in their debt-to-income ratio. The DTI or debt-to-income ratios is crucially important factor for lenders. A DTI that is too high suggests to lenders that you will not be able to repay the loan. DTI rejections account for nearly one-fourth of all lender mortgage loan denials.
- Issues over credit histories and scores are responsible for more than one-fifth of all lender rejections. Often, buyers find credit reports and scoring to be such a mystery that lenders suggest that buyers contact a loan officer at least four months before submitting an application. That way, the borrower has time to work on their credit and correct any issues that could lead to a rejection.
- Problems with the property valuation account for more than 12 percent of all loan rejections. These problems arise when buyers offer a higher price than the actual market value of the home. When lender ordered appraisals come back lower than the contract price, it is the buyers who foot the difference or lose out on the home they desire.