Mortgages are a key part of the home buying process. They can be the difference between being able to buy a home or not. However, getting approved for one is not always easy. And in 2022, they could become even more important if new regulations take effect. Here are 7 things that could stop you from getting a mortgage in 2022.
The following topics are covered below:
Poor Credit Score
One of the main things that can prevent you from getting a mortgage is having a low credit score. Lenders will pull your credit report when you apply for a mortgage and will use your credit score to determine whether or not you are a good candidate for a loan.
Poor credit can prevent you from getting a mortgage because lenders view you as a high-risk borrower. This is because poor credit generally indicates that you have missed payments in the Past or have a high level of debt. As a result, lenders are often hesitant to offer mortgages to people with poor credit, as they fear that the borrower will be unable to make the monthly payments. In some cases, people with poor credit may be able to get a mortgage by putting down a larger down payment or by agreeing to a higher interest rate, we call them bad credit mortgages. However, poor credit will always make it more challenging to get a mortgage.
High Debt-to-Income Ratio
Another thing that can stop you from getting a mortgage is having a high debt-to-income ratio. This ratio is calculated by dividing your total monthly debts by your gross monthly income. Lenders typically like to see a debt-to-income ratio of 36% or less. Getting approved for a loan may be difficult if your ratio is too high.
Lack of Steady Income or Self-employed
If you don’t have a steady income, this could also stop you from getting a mortgage. Lenders want to see that you have a consistent income so that they can be confident that you will be able to make your monthly mortgage payments. Getting approved for a loan could be difficult if you have an irregular or limited income.
Being self-employed is not a problem as long as you can show borrowers proof of a steady income. But if you can’t do that, it would be hard to secure a mortgage for you.
Lack of Savings
Another thing that can stop you from getting a mortgage is not having enough savings for a down payment and completion costs. While there are loans available that allow you to finance these costs, most lenders prefer that you have some money saved up so that you’re not borrowing the entire amount of the loan.
Limited Work History
If you have a limited work history, this could also be an issue when applying for a mortgage. Lenders like to see borrowers with at least two years of steady employment so that they can be confident that you have enough skills to retain jobs and will be able to make your payments. If you’ve only been working for a short period of time or had several jobs in recent years, this could make it challenging to get approved for a loan.
Bankruptcy, defaults, and CCJ’s in the Past
If you’ve filed for bankruptcy recently, this could also stop you from getting a mortgage. These events stay on your credit report for six years, and lenders will be hesitant to give you a loan if they see these items on your report. If a creditor successfully files a default or a CCJ against you , this will also affect you for 6 years.
Too Much Debt
If you have too much debt, applying for a mortgage could also be an issue, even when your income debt ratio is not too high. Lenders want to see that your monthly debt payments are manageable, and if they’re too high, it could make it difficult for you to make your mortgage payments each month. Additionally, if your debts are close to the amount of the loan you’re applying for, it could be challenging to get approved.
Hope you liked this article. If you want to know more about mortgages, you may read the following contents.
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