It's common for homeowners to need a residential mortgage in order to afford their house. According to research from Zillow, around 71 percent of people fit into that category - most of whom tend to be younger buyers.
Homeowners want to find the best deal on their mortgage, and the process can be a time-consuming one. Yet, there may be some factors working against them in their search. Here are just a few reasons why buyers won't be able to get the loan they want:
Before applying for a conventional mortgage, lenders recommend that potential homeowners ensure their credit score is in a good place. The reason is that people without the required minimum score for a particular type of loan may be denied a loan. For example, FHA loans base their down payment requirements upon whether people's scores are above or below 580, Zillow reported. Any score above that mark entitles homeowners to a 3.5 percent downpayment, while below could result in a 10 percent down payment or denial altogether. The inability to get a mortgage can be upsetting, but there are steps one can take to avoid it. The first is to understand the following elements that go into the credit score, according to CNBC:
Lenders may also consider the details of the application itself as well as whether people have previously interacted with their company - for other loans - in their decision, according to Experian.
"Those who fail to file their taxes are at risk of being denied a mortgage."
It is a federal requirement that people file their tax returns in an orderly and timely manner. Those who fail to do so are at risk of being denied a mortgage as well as incurring serious consequences from the IRS. It's crucial for homeowners to complete this legal obligation so lenders can verify applicants' income with federal proof, according to Mortgage News Daily.
Taking advantage of a filing extension won't hurt people's chances, but failing to complete the returns by this secondary deadline - or at all - will cause a negative outcome.
Zillow's research also found that almost 30 percent of homeowners - 20.6 million Americans - own their home outright. While this is a strong number, it's difficult for many people to achieve this goal.
That's why income plays such a vital role in loan acceptance. One of the main reasons people are denied a mortgage is due to their inability to afford the purchase or required upkeep of a home, according to a study published by the Harvard Joint Center for Housing Studies. Other factors relating to denial of a homeowner's loan, according to the Harvard research, included a poor national economic state in which to buy a house and a lack of a credit score.
Understanding these nuances will help prospective homeowners take the necessary steps to ensure they are approved for a mortgage.
Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2015 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.