This year, nearly 75 percent of mortgage applicants are approved for their requested loan—that’s the highest approval rate this decade! Although the remaining 25 percent is not initially approved on their loans, there is still a great chance to receive approval in the future. In fact, in most cases, an unapproved mortgage loan means “not now” and lenders encourage these potential homebuyers to re-apply with changes to their applications. But what changes can you make? Check out our suggestions to change your status from “eligible” to “approved”.
- Distinguish a compensating factor in your application: Many lenders will approve a loan that contains an element of risk, such as a low-ish credit score or a higher debt-to-income ratio. When you combine the two, however, you may prevent yourself from getting approved. Instead, focus on improving one of these factors. This will allow one factor on your application to compensate for the element of risk and drastically improves your ability to get approved for your loan.
- Understand the agency’s lender overlays: Although you may qualify for a mortgage on paper, it’s important to understand the mortgage agency’s lender overlays, or “stricter-than-book guidelines”. These allow lenders to enforce stricter rules than Fannie May or Freddie Mac to ensure that they are not penalized for processing a risky loan. When this occurs, it’s best to discuss your options with different lenders. Mortgage firms such as those within Eustis Family of Companies do not enforce additional restrictions on their loan options. This means that getting mortgage approval may be as simple as visiting a new lender!
- Discuss all possible options with your lender: Most lenders weigh the borrower’s financial factors through an application called Automated Underwriting System. With this system, even the smallest of changes in your application can have the ability to get you approved. For instance, you could make a slightly larger down payment or marginally buy down the interest rate. By discussing your options with your lender, you have a greater opportunity to get approved faster.
Not getting approved for your loan when you first apply is therefore no big deal—your local lender can provide you with the resources to get back on track and approved at a later date. For more information on how to re-apply for a mortgage, contact one of our mortgage specialists today.