Reasons Banks are Denying Loan Requests

Here are the top reasons banks are denying loan requests:

1. Poor credit: The borrower may have a heavy down payment or excellent equity built-up in the house, but if their credit score is under a certain threshold, obtaining a new loan or refinance from a traditional bank is very challenging. Even FHA loans now have a much higher credit score of 693 which is above the national average.

1. Insufficient liquidity: If the borrower doesn't have a heavy down payment (20%-30% for most banks) and strong excess liquidity, banks don't want to take the risk on funding their loan.

1. Lack of income: The borrower does not have consistent proof of income for the last two to five years. This presents a major hurdle for retired borrowers.

1. Lying on the application: Banks have learned their lesson and are no longer putting up with borrowers stretching the truth on their applications.

1. Debt: Borrower has excessive debt and their debt-to-income ratio exceeds the bank's guidelines.

1. Unemployment: Most lenders will like to see at least two years of stable work to issue loan approval.

1. Self employment: Lenders are looking at self-employed applicants with a lot more scrutiny making it very tough for these borrowers to get approved.

The improved standards are for the betterment of the industry and our overall economy, but at the same time, home buyers across the country are quickly realizing that reputable credit and stable income aren't always enough to qualify for a loan at a traditional bank in town.