Working with a mortgage broker is a different experience than working with a bank specialist. It’s also a different part of the home buying process compared to working with your Realtor. Some people may have never worked with a mortgage broker before and don’t know what to expect. Because of that, there are some questions…Read Article
What To Do When You’ve Been Declined at a Bank
The dreaded thing happens… you apply for a mortgage through your bank and you get declined. No one wants that to happen and luckily for you, it doesn’t mean that it’s the end of the road.
In this blog post, I’ll explain some of the reasons why you could get declined at a bank and what to do when that happens. Scroll to the end to reach out to me, we can work through the approval process to get you approved today!
Why you could get declined at a bank.
There are many different reasons why you may be declined at your bank for a mortgage. Here are some of the main reasons:
Income is one of the main qualifying factors for getting a mortgage, and is a common reason people get declined. Lenders view income differently depending if you’re self-employed or an employee. I’ve written blog posts for both cases explaining what you need to be making to qualify for a mortgage.
Just because your income doesn’t work at one bank and causes you to be declined there, that doesn’t mean you will be declined at all banks. When you work with a mortgage broker, I’m able to shop around for the best rate, as well as shop to find what lender will approve you. When you go to your bank for a mortgage, you only have access to that bank’s rates and rules.
It’s also good to note that there are also different avenues of income that can help you qualify. These can include the child tax benefit and rental income, if the house that you’re wanting to buy has a suite.
After income qualification, a lender looks at how much you have for a down payment. For properties under $500,000, you must have 5% of the purchase price. For homes between 500,000 and 1 million, you need 5% of the first $500,000 and 10% of the value over $500,000.
If you’re looking at a property over $1 million, you need 20% of the purchase price, with a sliding scale on any portion over $1 million. Some lenders want 50% on the portion over $1 million. Some lenders, area-depending, will allow a down payment of 20% up to a purchase price of $1.5 million.
If you don’t have the right down payment, we can work together to come up with a plan to get you there. We can also talk about receiving a gift from family, and how that works when qualifying for a mortgage.
Poor Credit History
I’ve mentioned before in the Bad Credit & Private Lending Mortgages blog post that poor credit history is one of the major reasons banks will decline a customer. From no credit, to past bankruptcies to thin credit, credit plays a huge role when being approved for a mortgage.
If you’re not eligible for a mortgage due to poor credit, we can put together a plan to help build your credit and get you approved.
The Stress Test
The stress test is something you may have heard of, but it can feel intimidating when you don’t fully understand what it means. The stress test rate is currently at 5.25%. So, if you’re approved for a mortgage with a lower rate, you still have to qualify for a rate of 5.25%.
The stress test is there to show lenders that you qualify to be able to make higher payments towards the mortgage.
Another reason a bank may decline your mortgage is because there’s a flag against the property. This could be that the property was a past grow-op, has structural damage or even mold. Another common issue is that the appraisal is too low or doesn’t match with your mortgage application.
What to do when you’ve been declined at a bank.
Now that you know some of the most common reasons why you could be declined at your bank for a mortgage, I want to stress that it doesn’t have to be the end of the road for you. I’ve worked with many clients who have been previously declined at banks and I’ve been able to get them a great rate with another lender.
Different lenders have different risk thresholds, and there are many options available. This means that I will work at scouting different lenders to see if I can get you approved elsewhere.
Your next step.
Your next step is to reach out to me by filling out my contact form below, my pre-approval application or simply give me a call at 250-826-3111. From there, I will learn about your situation and start looking around at different options for you.
Your dream home is possible and we will work together to get you a mortgage for your situation. I look forward to hearing from you and helping you on your journey to home ownership.