Did you know that a Realtor.com survey reveals that as few as 40% of all potential home buyers apply for their mortgage loan with confidence? As many as 60% of the home buyers in 2018 feared they would not be able to qualify for a mortgage loan.
Another survey, issued in September of 2019 by the company CoreLogic, states that high debt and low credit scores were the leading causes of mortgage denials last year.
In 2018 alone there were more than two hundred and sixty million loan applications for single-family housing. Those applications were for one-to-four unit properties, as well as a portion of the applications going toward manufactured housing.
The CoreLogic report suggests an overall loan application denial rate of just under 25%. And of that 25%, those home loan denials for high debt went typically to applicants with a debt-to-income ratio higher than 43%, with denials for credit history (late or missed payments, etc.) running second with
An interesting fact about this report; most loan denials (according to CoreLogic) examined in the study had a single reported source–multiple reasons for loan denial seemed rare. CoreLogic reported approximately four percent of those surveyed had loan denials for more than a single reason.
That implies that some borrowers could have gotten their home loans if they had just worked on reducing their debt ratios, established reliable payment patterns, and given their new financial approaches time to work properly.
In general if you have had a missed payment, it takes about 12 months to get back on track and improve your credit, and in that 12 months you must have no late or missed payments of any kind.
For debt ratios, it’s best to work on reducing the amount of credit card debt you carry. Get your balances below halfway to your credit limit or use that as your initial goal.
The actual balance you carry on your credit card accounts should ideally be no more than approximately 30% of the credit limit according to many personal finance experts.
The time factor cannot be stressed enough. You will need a MINIMUM of 12 months of on-time payments on your financial obligations, and you will need to take the time to pay down your cards.
Those who have credit issues can’t afford to be in a hurry for loan approval since making your credit work for you and not against you takes time to implement.
The goal of mortgage loan approval is within reach for many, but the time investment required may seem daunting at first. But the effort is well worth it.
Talk to a participating FHA lender today or learn more about your FHA home loan options.