Reasons A Loan May Not Be Approved

There are several reasons why lenders deny a loan application. Being turned down for a loan is not the end of the road. Click here for a few options that may help your loan has been rejected.

The most common reasons for being turned down may be:

• Poor credit report - A negative credit report generally indicates that the homebuyer has not established a good credit history. Your first step should be to verify that the credit information issued to the lender is accurate. Ask to see a copy of your credit report that the lender received, or obtain a copy of your credit report yourself from your local credit bureau. Furthermore, consult with a local HUD Housing counseling agency to determine what steps you can take to build your credit to an acceptable level. Depending on your situation, building your credit to an acceptable level may only delay your home purchase for a short time.
• Not enough income - Your ability to pay off a loan is reflected in your current earnings and your future income potential. Lenders may decline a loan if the homebuyer does not meet the income requirements or cannot show proof of stable income. It is to your advantage to establish a consistent and stable income.
• Too much debt - If your existing debts (credit cards, car loans, student loans) exceed the debt-to-income ratio for the loan, determine if you can pay off some of your debts before you apply for a mortgage. If you have credit cards you don't use, cancel them. Inactive credit cards are still considered potential debt. For more assistance with debt consolidation or other credit needs, contact a HUD Housing Counseling agency.