June 25, 2021
There are many reasons why a mortgage underwriter might deny your home loan application. There are some very obvious, Mortgage 101 reasons that you’ll read about in most finance blogs or mortgage loan blogs.
Among the most obvious answers? Low credit scores, a borrower with a history of late or missed payments for housing obligations, and homes that do not pass the appraisal process. But what about the not-so-obvious ones?
Red Flags For The Lender: Recent Career Changes
Could you be denied a home loan if you have recently changed jobs and the switch resulted in you earning less money or moving downward (career-wise) rather than upward?
It’s possible, depending on a variety of factors. It’s also possible to be turned down for a mortgage loan if you have recently stopped working a salary job in favor of a job that pays commissions.
The same is true if you have recently become self-employed.
Borrowers who have significant job changes within 12-24 months of loan application time may find it harder to get loan approval compared to those who wait a bit longer to show the lender that such income is stable, reliable, and likely to continue.
Underwriters Deny Home Loans For Unusual Bank Activity
Your loan officer is required to make sure your down payment is provided by approved sources and there must be a paper trail for all down payment funds.
Your lender is also charged with making sure you can afford the mortgage and sometimes having a three-to-six-month cash reserve is a good way to show that.
But if you have large, unexplained or unsourceable deposits in your account, this too can be a major red flag. Could you be denied a home loan due to such activity?
Your lender won’t be able to accept down payment money that is not sourced and properly documented. This is an issue that could lead to a major question about your suitability for the mortgage.
Talk To A Loan Officer
A very good way to prepare for these issues is to contact a loan officer and ask for advice on how to avoid these red flags and make yourself a better candidate for home loan approval.
There are plenty of things you can do to improve your own credit score starting with on-time payments on all financial obligations.
You can also work on reducing your debt ratio, eliminating high balances on your credit cards, and saving up for the down payment or cash reserves.
You can also call the FHA at their toll-free number, 1-800 CALL FHA, to request a referral to a local, HUD-approved housing counselor.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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