Top Reasons High Incomes Are Denied for Mortgages
Have you been denied for a mortgages despite your high monthly income? You’re probably feeling frustrated, to say the least. More than anything, you may be confused. Perhaps you’re thinking, “I can make the payments. What more do they need to know?” Keep reading to discover the top three reasons why your high income could have been denied for a mortgage.
Why Your High Income Didn’t Secure a Mortgage
As you likely know, you didn’t simply show your W-2 statements during the application process. Other factors are at play when applying for a mortgage. Lenders look at things like your proof of assets and your credit score. So, what might’ve happened? Why would you be denied when your gross monthly income is high?
3 Possible Reasons You Were Denied For Morgages
1. One of the leading reasons mortgage applications are denied hinges on your debt to income ratio (DTI). Your DTI is your gross monthly income vs. your monthly payments. Most lenders are looking for a DTI of about 40% or less.
2. Your credit history matters in the mortgage approval process. Lenders are looking to credit reporting agencies for the answers they seek. If you have a stellar score but only a year’s worth of credit history, that won’t meet most lenders’ minimum requirements. And know that your FICO credit score may surprise you, especially if you’ve been looking at free credit score sites. Those aren’t accurate.
3. Collateral may be the issue. Sure, you’re willing to pay $500,000 for the home of your dreams. But lenders conduct an independent appraisal. If the home isn’t worth $500,000 to the bank, you won’t secure the loan.
What You Can Do About It
That’s right. We’ve got a few tips. We’re not going to dance around the problem and then end there. What can you do about being denied? Nothing right away. But you can step back and examine your particular case in preparation for next time.
3 Ways to Improve Your Chances at a Mortgage
1. Reduce your DTI. There are many ways to achieve this. But you might think about a smaller mortgage. In other words, consider purchasing a smaller home. Or you might wait and save. A larger down payment will make a difference.
2. You may be a candidate for credit repair. If so, WJA can help. And we’re happy to chat with you to see if you’re a good fit for our aggressive program. If inaccurate items are reporting on your credit, they should certainly be removed. Working toward a higher credit score will increase your chances, and our credit analysts know how to coach you.
3. Become familiar with comparable sales when shopping. Don’t simply roll with an estimate or what you personally think a home is worth. Do your research upfront, and avoid collateral/lender appraisal issues later on.
Don’t Let “Denied” Get You Down
The initial shock of rejection is like a slap in the face. In reality, there are many reasons your application for a mortgage could have been denied. But you have the opportunity to learn and grow from here. Keep working toward your goal of owning your own home.