When getting a mortgage make sure you know what to do and not to do. This post will deal with what not to do. Here are the top 5 ways to get your loan denied.
Disputed Accounts
If you have an account on your credit report that you are disputing, you may not get approved for a mortgage. You must either have it resolved or you must have it removed. For directions on how to get your disputed account resolved and updated on your credit report, check out: Disputed Account.
Open or Applying for New Credit
DO NOT APPLY FOR NEW CREDIT!!! Once you have applied for a mortgage, do not apply for or open any new credit. This is for two reasons. Once you are pre-approved for your mortgage it is based on the payments you have. So if you go and finance a new TV, that payment may get your loan denied.
The other issue is that there is a new Mortgage Rule and your credit report is pulled again right before closing. This new report is to see if you have opened or applied for any new credit. if you have, then the mortgage professional(me!!) must document the new credit account and what the balance is, etc. This can delay your loan or like mentioned before deny your loan. Applying for credit is just as bad, so if you apply but don't open the account it's the same. Hold off on buying that new TV until after you close on your mortgage.
Write Off's On Your Tax Returns
We all want the Biggest Tax Return possible. But those write off's can affect you getting a mortgage. If you are self employed or get a 1099 at the end of the year, your income is decided by your gross income minuses your write off ( some expenses aren't deducted, like depreciation). So if you made $100k but wrote off $40k, then your income is really $60k. Make sure when getting approved you know your income from your tax returns. And if you are self employed make sure your mortgage professional (still me!!) has copies of your tax returns, that way they pre-approve you based on your true income.
Write Off's can still be a problem even if you get paid a W2 aka a salary. If you write off a lot of "Unreimbursed Expenses", these deductions are subtracted from your income. Again causing you to show that you make less money.
Moving Money
Do not move your money when applying for or doing your mortgage. On every loan we need your bank and retirement statements for the last 60 days. So any time you move money we have to document it. If we can not prove where it came from, then this could also get your mortgage denied. This also goes for any large deposits. Let's say you sell your motorcycle and get cash for it and just deposited that money. That's a problem, we have to document where any large deposits came from. In this example, the title, bill of sale, etc would work.
Changing Jobs
Once you are pre-approved, try not to switch jobs. Even thou you were pre-approved, you will want to make sure you are approved with this new job. Many lenders will not approve you until you have a paystub from your new job. Well this could take 1-4 weeks. I just need a paystub from your new job by the time we close on your loan.
Make sure when you are getting a mortgage you do your homework. And make sure you are working with a trusted mortgage individual. Don't make mistakes that will get your mortgage Denied.
David Krichmar
Mortgage Banker NMLS#293883 NMLS
Core Lending dba of Weststar Mortgage Corporation
Branch NMLS#868672 WMC NMLS#93243
Has Written For Realtor Magazine, Houston Agent Magazine, Scotsman Mortgage Guide
Approved MCE Instructor
Office:832-689-6012
David.Krichmar@gmail.com
www.DaveYourMortgageGuy.com
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9 Comments on 5 Great Ways To Make Sure Your Mortgage Gets Denied
Great info, I plan to present most of it at our next team meeting, although I will credit you. Thanks for the info.
Thanks Dave. This is great information that everyone should know... it helps keep the deal together!
Great, Thanks Dale. That is very cool.
Those are all big issues that we face today. At least some of them do have resolutions. Luckily, a borrower with a disputed account might still be able to get approved. Taking on new debts or having too many business expenses may not be able to be overcome though.
very true, Thanks Rodney.
These are good tips, Dave. It's extremely frustrating when something your client does causes the loan to be declined. I had one recently whose loan was declined because her employer gave her a promotion right before closing. The only problem was that the new job paid a lower base salary plus a good commission, whereas the old one was base salary only. Without a year of commission income, the new base salary was not enough to qualify. Great post!
Wow, Rose, that was a horrible situation to be in.
Dave, more great advice. I have had a $72.00 dispute from a year ago on my credit report give me trouble with a refiance on rental property. Could not go through Fannie Mae, thank goodness we could go through Freddie Mac. Now I need to have the dispute taken off so it won't give me trouble in the future.
Thanks Suzanne, my understanding is that disputed accounts must be removed for all mortgage types. Doing it under Freddie Mac use to work, but that has changed.