With interest the lowest they have been in years, many homeowners are taking advantage of the situation and refinancing their existing home loans. During the process some homeowners may realize that they do not qualify for the loan amount they are in need of. This may be rare, but it does happen. Recent studies have shown that 6 out of 10 homeowners will qualify for a home loan. There are many different reasons why some homeowners are having difficulty being approved for a loan. We are going to explain what some of the most common reasons are.
One of the most common problems that people attempting to get a loan experience is credit. If the credit score of a homeowner is too low they will likely find it difficult to be approved for a new loan. Many lenders feel that a credit score of less than 620 is not acceptable. Some ways for homeowners to remedy this problem is to pay down some of their existing debt before attempting to acquire a loan. It is also suggested that borrowers limit the amount of times their credit is checked for a period of 30 days.
Another common problem that borrowers experience is their existing level of debt. To ensure that lenders receive the most current credit reports it is important that you carefully look at your credit report at least once a year. You should ensure that all paid off debt is reflected on the report, if a debt that has been paid in full is still showing on your report, you will need to have that removed prior to applying for a loan. If you co-signed for someone else you will also need to prove to lenders that those payments are current. Some lenders may require that you provide them with proof that the payments have been made and that the loan is current.
Borrowers who are self-employed may also experience difficulty when it comes to getting approved for a loan. It is important for self-employed individuals to ensure that they are showing enough income on their tax returns. Getting approved for a loan when you are self-employed can be a huge undertaking; it is not impossible but you should expect to experience delays and questions from potential lenders.
Another common area that lenders look at is your assets. It is important that the cash you plan to use either as a down payment or funding source is fully visible to lenders. Lenders require that all money come from some type of bank account. Lenders also pay close attention to how many times and how much money you have transferred from different accounts. It is important that you try not to transfer too much money into too many different accounts while applying for a loan.