Many real estate professionals agree that it is a good time for prospective home buyers to make a home purchase – but for those who plan on getting a loan from a mortgage lender, but you should be aware of the common reasons an application might be denied.
According to a new report from the National Association of Realtors, the main reason home buyers of all ages reported having their application rejected was their debt-to-income ratio. Thirty-five percent of overall respondents cited this reason – including nearly 60 percent of people aged 65 to 73. Why? Because many in the older age bracket have lower fixed incomes than they had when they were active in the workforce.
The next reason that is common is the unspecified “other,” followed by low credit scores (21 percent). Fourteen percent said their income was unable to be verified, while 12 percent said they had insufficient funds for a payment that is down.
Other reasons a mortgage application could get rejected include having a tax that is unpaid, having business debt or not having enough savings or assets, among many others.
Overall, about 31 percent of all home buyers said the mortgage application process was either much more – or somewhat more – difficult than they had anticipated.
The news that is good however, is that among all buyers, only 5 percent reported having a mortgage lender reject their application. The rate rose to 7 percent for those aged 40 to 54. Most respondents said they only had an application rejected once. Caring lenders can help prospective buyers plan and correct problems prior to submitting the loan. Be patient and follow the plan and you can be approved! Just don’t quit!
The median percent of a purchase financed with a mortgage was 88 percent – amounts tended to decrease with age, from 92 percent among those aged 22 to 29, to 75 percent for those aged 65 to 73 among all home buyers.
The top source of down payment funds was savings, followed by proceeds from the sale of a primary residence then gifts from family members are becoming more common.
The Federal Reserve’s decision to cut interest rates by 50 basis points this week – a response to the coronavirus (COVID-19) outbreak – could coax more buyers into the housing market.
If mortgage rates should turn higher, then demand could fall back and price gains ease, but if they stay in the current low ran, prices will continue to rise. This creates a kind of urgency for buyers to get into something before prices rise out of reach.
One area that could continue to struggle, however, is the luxury real estate market.
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