Most borrowers are worried they may be denied a home loan for one reason or another. How much is the average house hunter in danger of getting turned down for a mortgage? That depends on the kind of real estate you are looking for, your recent credit activity, and other factors.
In general, you’ll find it harder to get a loan approved if one or more of the following things apply to you (see below).
You Have A Recent Adverse Credit Action On Your Credit Report
You risk being turned down for an FHA home loan or any other major line of credit if you were declined credit, employment or insurance recently.
You Have High Credit Card Balances
Credit card balances above the 50% line (halfway to your credit limit) are risky when it comes to home loan approval.
Ideally, your credit use should include balances below 30% on all cards. Some borrowers may find getting there more challenging than others, but the effort is worth it when it comes to mortgage approval.
You Have Unpaid Outstanding Debt
Some kinds of delinquent debt make a borrower ineligible for government-backed mortgages such as FHA loans.
If you have delinquent federal debt including tax debt, you will be required to enter into a satisfactory-to-the-creditor payment plan and have a minimum number of initial payments made as a condition of loan approval.
You will be required to make the minimum number of payments in the corresponding number of months, which means if there is a requirement for three months’ worth of payments, you cannot pay all three at once. Those payments must be made on a monthly basis instead.
You Are Applying For The Wrong Kind Of Mortgage
You will not be approved for an FHA mortgage loan, for example, to purchase a bed-and-breakfast, or a property that is not primarily residential in nature.
You can’t get an FHA loan approved to buy a home at least one of the borrowers obligated on the loan will use as their main residence.
You Are Applying For A Home Loan For Unapproved Property
Home loans often have restrictions on the kinds of property you can buy. FHA loans, for example, can only be approved for real estate. You cannot buy a houseboat with an FHA loan, in spite of the word “house” in “houseboat”.
A Houseboat cannot be legally classified as real estate and cannot be fixed to a permanent foundation. Both are conditions of loan approval for FHA mortgages.
Talk to a loan officer about your FHA home loan options today. You’ll be glad you did. You can learn about FHA mortgages for mobile homes, manufactured homes, and you can even have a home built for you from the ground up on your own land using an FHA One-Time Close Construction Loan.