Why San Diego Home Buyers Have Their Mortgage Application Rejected

Almost all San Diego home buyers go through the process of getting a mortgage. Few are fortunate enough to be able to pay in cash. Yet, many potential San Diego home buyers do not concentrate enough on the mortgage process even though it is essential to securing a home. This lack of preparation can often lead to mortgage applications getting rejected.  

To avoid a rejected mortgage application a potential San Diego home buyer has to work on these four areas.

Credit

Applying for any loan without any credit history is going to lead lenders to be wary. And potential home buyers will need to have a solid credit history.  But at the same time, having a terrible credit history is going to raise some red flags.  

People have to use accounts like a credit card to establish a credit history. But they have to stay on top of their payments so their history is not filled with late payments.

Still, a person that has never owned a credit account can still qualify for a loan.  If applying for a mortgage with no credit history, ask the lender to look at other accounts like utility payments, rent payments, or even payments on schooling.  These are all regular payments that will show if a buyer is reliable in making their payments on time.

Opening Multiple New Accounts

Potential San Diego buyers often think that they do not have enough credit history and rush out to get new credit cards just before applying for a mortgage.  In actuality, this is more damaging than simply having no credit history. This is because opening a number of new credit accounts will lower a person’s credit score.

Keep in mind that lenders do not want to see brand new accounts on credit reports.  With new accounts, the person has not established their spending habits and there is a chance they are not going to handle the account responsibly.  A lender does not want to offer a mortgage to someone who has the potential to financially ruin themselves with all of the new credit recently made available.

Outstanding Debts

Debt can come in many shapes and sizes. For example, many people incur medical bills which they are unable to pay.  If a major injury puts them out of work, they may have little to no income coming in. By the time many people are back on their feet, their debts have already been sent to collection.  

Once a medical debt is sent to a collection agency they can report that it is unpaid and overdue to the credit bureaus.  This will show up negatively on a credit report.  

You should not let it get to this point.  Talk with the billing department and set up a payment plan before it gets to collections.  Most will work with even very small payments until a person can start making larger ones.

Bumpy Employment History

A lender is going to take into account how long a borrower has been employed in their most recent position.  This is because a borrower who has recently changed jobs may be a big risk for a lender. They want to know that the job is secure and, in turn, the income is secure.  Most shoot for the borrower to have been in their most recent position for two years.

The only person standing in the way of a potential San Diego buyer from getting a mortgage is the buyer himself/herself.  Even though it may seem like lenders make it difficult to qualify, a little planning can go a long way.  

When a buyer is first considering buying a San Diego home they must start paying attention to their credit score and start paying down their other debts.  This is a sure-fire way to impress a lender and get approved with a great interest rate.