Common Red Flags for Mortgage Lenders


For most homebuyers, a mortgage is essential. In the absence of a manageable mortgage, most of us would be unable to afford an investment as large as the average home. So, if you’ve never applied for a mortgage loan, it pays to do your homework in advance of submitting applications to lenders. There are a number of red flags for which lenders are constantly on the lookout, and if your application reflects any of them, you’re likely to face rejection.

Outstanding Credit Card Debt

There’s little wonder as to why lenders are hesitant to take chances on applicants with massive amounts of outstanding credit card debt. After all, if an applicant is unable to stay on top of their existing debts, what reason is there to assume they’ll be able to stay current with monthly mortgage payments? That being the case, if you apply for a mortgage loan without getting a handle on your credit card debt, don’t be surprised if your application is met with rejection.

With this in mind, make a point of paying down any outstanding credit card debt in advance of applying for mortgage loans. This may mean having to delay a home purchase, but it will ultimately be a boon to your chances of loan approval. Furthermore, once you’ve taken care of the aforementioned debt, give your credit score a little bit of time to recover before you start submitting mortgage applications.  

Ballooning Credit Card Debt

In addition to taking care of outstanding credit card debt, you’ll need to avoid accumulating more credit card debt while your application is being considered. So, if you need to make any large purchases during the application process, it may be a good idea to put them off unless they’re absolutely essential. Alternatively, if you’re able to do so, simply make these purchases in cash or talk to a close friend or family member about a short-term loan.

Lack of Sufficient Income

Upon submitting a rental application, most landlords will want to confirm that you make enough money to comfortably afford rent. Since tenants who are unable to keep up with rent are guaranteed to lose property owners money, it’s easy to see why landlords place so much importance on income – and the same is true for mortgage lenders. Why grant a loan to someone who lacks the means to repay it within a reasonable time-frame?

As such, you should avoid applying for mortgage loans when you’re between jobs. Even if you’re confident in your ability to quickly find another job, many lenders are unlikely to share this level of faith in your employment prospects. You should also avoid quitting your job during the application process, as this can throw a wrench into your chances for approval. So, unless you have another job that pays as much or more than your current one lined up – and are able to provide proof of this fact – it’s in your best interest to remain gainfully employed throughout the aforementioned process. North Carolina-based homebuyers looking for homes for sale in Asheville, NC would do well to have consistent income.    

Unwillingness to Make a Large Down Payment

Many of us are wired to spend as little money as possible at any given time. Considering how pricey life in virtually every area of the U.S. has become, it’s only natural that we’d seek to save money at every opportunity. However, this level of frugality may serve as a hindrance to your chances for loan approval. A willingness to make a large down payment shows lenders that you’re responsible, serious about homeownership and in a good place financially. As an added bonus, a large down payment stands to reduce the cost of your monthly payments.

Attempting to purchase a home without the aid of a good mortgage loan is unlikely to work out for you, especially if you don’t have massive savings or aren’t independently wealthy. That being the case, it’s in every first-time homeowner’s best interest to maximize their chances of mortgage loan approval. Without even realizing it, you may be engaging in behaviors that serve as red flags to lenders and inadvertently tanking your chances of loan approval. So, if any of the examples provided above apply to you, you’d do well to correct these blunders before proceeding to submit mortgage applications.  


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