The Top 5 Reasons Mortgages Get Declined

Applying for a mortgage is a tedious process, to say the least. It is nerve-wracking, but what’s worse is getting rejected for the loan after all that work. If you’re thinking of buying a home, it’s important you do what you can to make sure you’re in the best position to be approved for a loan. Below, we discuss five of the most common reasons you could be rejected for a mortgage.

1. Poor Credit

Lenders use your credit score and your credit history to decide if you’re a risky investment. If your credit score is too low or there are a lot of derogatory remarks on your credit report, you could be denied a mortgage. Many lenders consider a credit score below 620 to be too low to be approved. You can obtain your credit report at to find out what it says and what you need to do to fix it.

2. Insufficient income

Another aspect a lender looks at is your ability to pay back a mortgage. Your debt to income ratio should be such that you can afford the monthly mortgage payments as well as the homeowner’s insurance and property taxes.

If you don’t make enough money or can’t prove that you do, you won’t be approved for a mortgage.

3. Not Enough of a Down Payment

Most lenders require 5-25 percent of a home’s purchase price as a down payment. They see this money as an investment in your home. While there are some government programs that don’t require a down payment, you should be prepared to make a substantial down payment when you purchase a home.

4. Issues with the Property Itself

A rejection doesn’t always mean there’s a problem with the buyer. Sometimes, there’s an issue with the property that throws a monkey wrench into the process. For example, an appraisal may come in much lower than the asking price, which forces the lender to reject the mortgage.

If this happens to you and you have your heart set on the property, shopping various lenders can help resolve this issue.

5. Non-Consistent Employment History

Your lender wants to know that you’re going to be able to hold a job long enough to pay back the money they lend you. For this reason, most lenders like to see two or more years of consistent employment history. Be ready to show pay stubs or tax forms to prove your employment history when applying for a mortgage loan.

There’s always a chance you could be rejected for a mortgage, but by using the information supplied above, you can avoid some of the most common pitfalls. Remember, just because you’re denied once doesn’t mean you’ll be denied again, so work hard to remedy whatever the cause you were rejected the first time to realize your dreams of owning a home.