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4 Reasons Why Your Mortgage May Be Denied After Pre-approval

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It Isn't Always a Clear Road after Pre-approval: 4 Reasons Why Your Mortgage May Be DeniedSo you’ve been pre-approved for a mortgage – great! You’ve taken the first step toward becoming a homeowner. But before you start picking out china patterns, you’ll want to keep in mind that a pre-approval isn’t the same thing as a mortgage agreement. There’s still no guarantee that you’ll actually get a mortgage.

But why would a lender deny a mortgage after pre-approving a borrower? Here’s what you need to know.

Sudden Changes In Income Or Employment History

A number of mortgages will require borrowers to have consistent employment for a certain length of time. If you apply for an FHA mortgage, for instance, you’ll be obligated to have an employment history dating back at least two years. Any gaps in your employment history will require a written explanation that your underwriter will need to approve.

If you switch career fields while in the process of buying a home and it has a significant impact on your income, your lender may deny your mortgage.

Credit Mismanagement After Pre-Approval

Lenders like to see consistency – so if your credit score suddenly drops after you’ve been pre-approved for a mortgage, it sends up a red flag. Even something as minor as a late payment on a cell phone bill could affect your credit score just enough to cause your lender to deny you. Pay extra attention to your bills throughout the home buying process, and make sure nothing slips past you.

Taking On More Debt In The Interim

A number of buyers will take on more debt after they’ve been pre-approved for a mortgage. Although it may be tempting to get a new car to go with your new house, getting a car loan will change your debt-to-income ratio and cause your lender to think twice about how responsible you are. If you’re in the process of buying a home, hold off on any other major purchases until after the deal has closed.

An Unsatisfactory Bank Appraisal

Sometimes, your mortgage can be denied for reasons that have nothing to do with you. Some lenders will only issue a mortgage if the property value of the house in question is appraised above a certain level. Others will deny a mortgage if the home requires roof repairs, electrical work, or a new heating system.

You’ll want to check with your lender to see what home conditions could be cause for denying your mortgage application.

Getting approved for a mortgage is a convoluted process at best, but a mortgage advisor can help you to navigate the approval process with ease. Contact your local mortgage professional for more tips on how to ensure you get approved.

Financial Fundamentals for First-Time Homebuyers

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Financial Fundamentals for First-Time Homebuyers | MyKCM

Are you prepping to buy your first home? If so, one of the steps you should take early on is making sure you’re financially ready for your purchase. Here are just a few of the financial fundamentals you’ll need to focus on as you set out to buy a home.

Build Your Credit

Your credit is one element that helps determine which home loan you’ll qualify for. It also impacts your mortgage interest rate. While there are many factors that go into your mortgage application, a higher credit score could lead to a lower monthly payment in the long run.

So how do you make sure your credit is in the best shape possible when it’s time to buy? A recent article from NerdWallet lists a few tips you can use as you work to build and strengthen your credit. They include:

  • Tracking your credit and disputing any errors that show up on your reports.
  • Paying your bills on time. This includes making loan payments and paying down any open lines of credit.
  • Keeping your credit card balances low. Paying more than your minimum monthly balance when you’re able can help.

Automate Your Savings for Your House Fund

You might also be wondering how you can achieve your down payment savings goals. Bankrate provides buyers with a number of tips to help you save, including searching for down payment assistance programs and ways you can save more, faster. As the article says:

“One of the best ways to save for anything — including a down payment — is to set it and forget it. If you receive a regular paycheck, ask your employer to direct a portion of that payment into a savings account. If you’re a freelance worker or independent contractor, set up a recurring transfer from a checking account to a savings account to establish the routine.”

Get Pre-Approved

As you prepare for your purchase, you’ll also need to have a good grasp on your budget and how much you’ll be able to borrow for your home loan. That’s where the pre-approval process comes in.

Pre-approval from a lender lets you know how much money you can borrow for your home loan. And having that knowledge, plus an understanding of your savings, can help you decide on your target price range for a house.

From there, you can start browsing for houses online and see what’s available in your area in that general price point. This can help you really understand your options so you can start to picture your future home.

For Customized Advice, Build a Team of Professionals

Finally, the best way to make you’re prepared for your purchase is to connect with trusted real estate professionals. Having expert advisors in the industry will help you make strong decisions throughout the homebuying process based on your specific goals, finances, and situation. They know the market and can guide you toward the home of your dreams.

Bottom Line

If you’re ready to get the homebuying process started, let’s connect so you can begin to build your team of professionals today.

What’s Ahead for Mortgage Rates This Week – December 26, 2022

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Last week’s economic scheduled economic news included readings on sales of previously-owned homes, housing starts,  and building permits issued. Readings on the Consumer Price Index, which tracks inflation, were also released along with weekly readings on mortgage rates and jobless claims. What's Ahead For Mortgage Rates This Week - December 26, 2022

Sales of previously-owned homes fall in November

The National Association of Realtors® reported fewer sales of previously-owned homes in November than in October. 4.09 million previously-owned homes were sold year-over-year in November as compared to 4.43 million sales reported in October. This was the tenth consecutive month showing fewer sales of previously-owned homes. Although mortgage rates and home prices have eased recently, it will take additional time for would-be buyers to adjust their budgets during and after the winter holiday season.

The  Commerce Department reported 1.34 million building permits issued in November; analysts expected a reading of 1.48 million permits issued as compared to October’s reading of 1.51 million permits issued. The onset of winter weather typically impacts building permits issued and rising concerns about inflation and recession also sidelined home builders who took a “wait-and-see” position about current economic conditions.

Housing starts were unchanged in November with 1.43 million housing starts reported on a seasonally-adjusted annual basis. Analysts expected a reading of 1.40 million starts in November.

Mortgage Rates. Inflation, and Jobless Claims

Freddie Mac reported mixed readings for average mortgage rates last week as the average for 30-year fixed-rate mortgages fell by four basis points to 6.27 percent. The average rate for 15-year fixed-rate mortgages rose by 15 basis points to 5.69 percent.

Month-to-month inflation rose by 0.10 percent in November as compared to an increase of 0.40 percent in October. The average rate for 15-year fixed-rate mortgages rose by 15 basis points to 5.69 percent.

Core inflation, which excludes volatile food and fuel sectors, rose by 0.20 percent as compared to October’s month-to-month increase of 0.30 percent. Year-over-year inflation rose by 5.50 percent in November as compared to October’s year-over-year inflation rate of  6.10 percent.

216,000  first-time jobless claims were filed last week, which fell short of the expected reading of 220,000 initial claims filed but surpassed the prior week’s reading of  214,000 new jobless claims filed. The final consumer sentiment report for December showed an index reading of 59.7 as compared to the expected reading of 59.1 and November’s index reading of 59.1.

What’s Ahead

This week’s scheduled economic reporting includes readings on U.S. housing markets, pending home sales, and weekly readings on mortgage rates and jobless claims.

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