Owning a home is a significant responsibility and is often viewed as being the standard for adult achievement. For these reasons, many home loan applicants research both the requirements for obtaining a mortgage and what steps they will need to follow in order to increase their chances of being approved for a loan that will help them purchase the house of their dreams. It is a common occurrence, however, for potential home buyers to suddenly find that their request for a home loan has been rejected. Below is a list of reasons why a mortgage application might be denied and what buyers can expect during the process.
Damaged property
Potential home owners may find a property available at bargain basement prices due to repairs that it desperately needs. This can be a strong temptation when they compare the cost of purchase versus the future value of the home once they make all of their desired renovations. Furthermore, some home owners enjoy a challenge or want to custom craft a home to their liking instead of merely moving into a house furnished with the previous owner’s style. A property which is too distressed, however, can often lead to the mortgage lender denying the home loan. From the lender’s point of view, any property which requires extensive repair also stands a good chance of failing to accrue value. The lender can never rely on the buyer’s intention to renovate it, so they will typically assume that the property would be a financial loss for all parties involved, and thus deny the mortgage.
Too much debt
If a home owner builds up too much debt, there is a good chance that the mortgage lender will deny their application for a home loan. Read more about debts and mortgage application.