There are many reasons why a consumer can be turned down for a Mortgage.
Let’s take a look at the 10 most common causes of mortgage denials based only on credit reports.
- Have open collections with balances.
- Most lenders will not approve a consumer for a mortgage if they have any outstanding collections with balances. This is currently the case for all FHA Loans and most conventional mortgages. (Medical Collections do not apply.)
- Have had a Bankruptcy within the last 2 years.
- Lenders want to see 2 years of perfect payment history after a bankruptcy is discharged. If your Bankruptcy was less than 2 years ago, you will have a very hard time finding a lender to approve you.
- Have had a Foreclosure within the last 3 years.
- Most lending institutions won’t even consider your loan application if you have had a foreclosure within the last 3 years. So focus on improving your credit scores, paying your bills on time, and rebuilding your credit while you’re within that 3-year range.
- Have an unpaid judgment against them.
- An unpaid judgment not only decreases your credit score but gives the plaintiff First position over your assets should you ever default. Banks don’t like to be in the Second position and will most likely deny anyone with an unpaid judgment against them.
- Have an unpaid Tax Lien.
- Like an unpaid judgment, the holder of the Lien carries the First position over the bank.
- Have multiple social security numbers reporting on their credit file.
- As strange as this sounds, I have seen consumers with 6 different social security numbers on their credit reports. Whether it was due to merged reports, identity theft, or typos, this sends up a huge red flag, and lenders don’t like red flags.
- Have unpaid charge-offs/profit & loss write-offs on their credit report.
- Like collections, these accounts must be reported as paid or at a $0 balance before your loan can be processed further.
- Have made a late payment of over 30 days within the last 6 months.
- This is a typical rule for FHA loans, but more and more conventional loans are following this precedent.
- Client is on OFAC list (Office of Foreign Assets Control).
- This basically means that you are a terrorist. Really, I’m not joking. If you’re on the OFAC list you may want to reach out to us immediately.
- Consumer is listed as deceased.
- This is pretty self-explanatory, if you’re dead, you can’t get a mortgage. And if you’re really alive but your credit report says your dead, you’re going to have to get everything straightened out before anyone will approve you for anything, especially a home loan.
Hope you enjoyed reading the list, take care of yourselves and your credit!