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Reasons You May Be Denied A Home Loan

October 29, 2019

Reasons You May Be Denied A Loan

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.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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