Why Do Lending Institutions Deny Loan Applications?

Spurred by low interest rates, many people continue to refinance their mortgage and/or purchase new homes. But some find out that they don’t qualify for a mortgage after submitting a loan application. What are some of the reasons why a lending institution would deny an application?

Credit score/history: Many of today’s loan programs, whether conventional or government-backed, require a minimum credit score and a satisfactory credit history. While there are programs that allow for credit scores below 620, consumers must realized that those programs will have more restrictions. For consumers who are facing credit issues, Reliance First Capital offers a free Credit Coach service which can provide insights and recommendations on how to correct and/or improve your credit score. If you're interested in knowing more about the Credit Coach program, ask your Reliance First Capital mortgage analyst for more details.

Appraised value: Lenders, as well as homeowners, are at the mercy of the appraised value of a home for any loan program that requires an appraisal (which is most loan programs). The appraised value is used to determine the Loan-to-Value (LTV) ratio (loan amount / appraised value) which is a key determinant for qualifying for a mortgage.

Income: Lenders, the government, and all involved in the mortgage process want to make sure that a homeowner has the means to consistently pay their mortgage. Thus an applicant’s income is highly scrutinized to ensure this fact. While lenders can take into account issues like seasonality of pay, sources of income, etc., a loan will be denied if it is determined that not enough income is available/provable to meet the proposed monthly mortgage payment.

To learn more about which loan programs you may qualify for, contact your Reliance First Capital mortgage analyst today. Reliance First Capital can find the loan option to meet your unique lifestyle and financial goals. Learn more about Reliance First Capital by contacting us at 866-735-9004 or visiting us online at www.reliancefirstcapital.com.