As many as 27% of home loans are rejected. It is important to understand what to do if your application for a home loan is denied.
First, ask “Why?”
Law dictates all lenders must inform you of the exact reason or reasons your application was rejected. Do not hesitate to ask questions or request further information or explanation. What you learn will allow you to reshape your financial landscape and re-apply for a loan when you’re sure you’ve fixed all the prior issues.
Two Primary Reasons for Mortage Loan Rejections
Most declined loan applications boil down to one of these two items:
- Insufficient income is one of the main reasons a home loan is rejected. Luckily, veterans and active service members who are eligible for a VA home loan have an edge. The VA home loan is a government backed loan that requires no down payment. This is a significant advantage for those people with lower income and little to no savings.
- Poor credit rating is another major factor in a home loan rejection. For a regular home loan, most lenders will accept a minimum score of 660. Again, those eligible for a VA home loan are in luck; most VA home lenders will accept a credit score of 640 and some will even accept a score of 620.
- However, if you are rejected on the basis of poor credit, you have every right to request the full report and the name of the agency that created it. Again, lenders are legally obligated to supply you that information if it is requested within 60 days.
Look for Errors
Make sure the credit report is accurate and contains no errors. If you find any errors in the report, you can contest the errors with the report agency. If there are no errors, you can work with a financial guide to pay off any debts and raise your score to the level required by the loan.
Summing it All Up
- The easiest way to avoid loan rejection is to understand what you need before you go in.
- Look at your income to debt ratio.
- Know your credit score.
- Be knowledgeable of the requirements it takes to obtain a certificate for a VA loan.
- Research and preparation are the two best tools at your disposal to avoid being rejected for a home loan.
Don’t hesitate to call Ryan any questions you have about VA Loans, understanding reasons for rejection or advice on credit improvement.
More information on credit scores here:
[weaver_show_posts cats=”” tags=”” author=”0″ single_post=”understand-credit-score-2014″ orderby=”date” sort=”DESC” show=”excerpt” hide_title=”” hide_top_info=”” hide_bottom_info=”1″ show_featured_image=”1″ show_avatar=”” show_bio=”” excerpt_length=”” style=”” class=”homepageBlog” number=”1″ more_msg=””]